0001558370-21-004287 | 20-F | XBRL Viewer | Mexican Economic Development INC

December 31,

December 31,

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Cover Page	12 Months Ended
Cover Page	Dec. 31, 2020 shares
Document Information [Line Items]
Document Type	20-F
Amendment Flag	false
Document Period End Date	Dec. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY
Entity Registrant Name	MEXICAN ECONOMIC DEVELOPMENT INC
Entity Central Index Key	0001061736
Current Fiscal Year End Date	--12-31
Entity Incorporation, State or Country Code	O5
Entity Address, Address Line One	General Anaya No. 601 Pte.
Entity Address, Address Line Two	Colonia Bella Vista
Entity Address, City or Town	Monterrey
Entity Address, State or Province	NL
Entity Address, Country	MX
Entity Address, Postal Zip Code	64410
Contact Personnel Name	Juan F. Fonseca
Contact Personnel Email Address	investor@femsa.com.mx
Contact Personnel Fax Number	328-6167
Document Annual Report	true
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Interactive Data Current	Yes
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Accounting Standard	IFRS
ICFR Auditor Attestation Flag	true
Document Transition Report	false
Document Shell Company Report	false
American depositary shares [member]
Document Information [Line Items]
Title of 12(b) Security	American Depositary Shares, each representing 10 BD Units, and each BD Unit consisting of one Series B Share, two Series D-B Shares and two Series D-L
Trading Symbol	FMX
Security Exchange Name	NYSE
2.875% Senior Notes due 2023
Document Information [Line Items]
Title of 12(b) Security	2.875% Senior Notes due 2023
Trading Symbol	FMX23
Security Exchange Name	NYSE
4.375% Senior Notes due 2043
Document Information [Line Items]
Title of 12(b) Security	4.375% Senior Notes due 2043
Trading Symbol	FMX43
Security Exchange Name	NYSE
3.500% Senior Notes due 2050
Document Information [Line Items]
Title of 12(b) Security	3.500% Senior Notes due 2050
Trading Symbol	FMX50
Security Exchange Name	NYSE
BD units [member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	2,161,177,770
B units [member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	1,417,048,500

Consolidated Statements of Financial Position $ in Millions, $ in Millions	Dec. 31, 2020 USD ($)	Dec. 31, 2020 MXN ($)	Dec. 31, 2019 MXN ($)
Assets
Cash and cash equivalents	$ 5,410	$ 107,624	$ 65,562
Investments	33	662	12,366
Trade accounts receivables, net	1,420	28,249	29,633
Inventories	2,214	44,034	41,023
Recoverable taxes	860	17,100	18,761
Other current financial assets	34	681	1,146
Other current assets	147	2,919	4,088
Total current assets	10,118	201,269	172,579
NON CURRENT ASSETS
Equity accounted investees	4,940	98,270	97,470
Property, plant and equipment, net	5,686	113,106	114,513
Right-of-use assets, net	2,752	54,747	52,684
Intangible assets, net	7,817	155,501	146,562
Deferred tax assets	1,108	22,043	20,521
Other non-current financial assets	1,628	32,386	22,680
Other non-current assets	379	7,526	10,532
Total non-current assets	24,310	483,579	464,962
TOTAL ASSETS	34,428	684,848	637,541
Liabilities
Short-term debt	225	4,469	3,935
Current portion of non-current debt	218	4,332	12,269
Current portion of lease liabilities	340	6,772	7,387
Interest payable	104	2,069	895
Trade payable	2,665	53,018	57,178
Accounts payable	1,114	22,150	19,498
Taxes payable	632	12,578	11,717
Other current financial liabilities	655	13,025	23,655
Total current liabilities	5,953	118,413	136,534
NON-CURRENT LIABILITIES
Non-current portion of long-term debt	9,042	179,864	101,747
Lease liabilities	2,591	51,536	47,292
Post-employment benefits	365	7,253	6,347
Deferred tax liabilities	303	6,033	6,946
Other non-current financial liabilities	252	5,022	2,481
Provisions and other non-current liabilities	480	9,540	10,443
Total non-current liabilities	13,033	259,248	175,256
TOTAL LIABILITIES	18,986	377,661	311,790
EQUITY
Capital stock	168	3,348	3,348
Additional paid-in capital	895	17,808	18,162
Retained earnings	10,931	217,430	229,794
Other comprehensive income	(43)	(843)	685
Total controlling interest	11,951	237,743	251,989
Non-controlling interest	3,491	69,444	73,762
TOTAL EQUITY	15,442	307,187	325,751
TOTAL LIABILITIES AND EQUITY	$ 34,428	$ 684,848	$ 637,541

Consolidated Income Statements $ in Millions, $ in Millions	12 Months Ended
Consolidated Income Statements $ in Millions, $ in Millions	Dec. 31, 2020 USD ($) $ / shares	Dec. 31, 2020 MXN ($) $ / shares	Dec. 31, 2019 MXN ($) $ / shares	Dec. 31, 2018 MXN ($) $ / shares
Statement [Line Items]
Net sales	$ 24,654	$ 490,425	$ 504,059	$ 468,894
Other operating revenues	128	2,541	2,652	850
Total revenues	24,782	492,966	506,711	469,744
Cost of goods sold	15,248	303,313	315,230	294,574
Gross profit	9,534	189,653	191,481	175,170
Administrative expenses	1,156	22,988	19,930	17,313
Selling expenses	6,204	123,405	121,871	114,573
Other income	168	3,343	1,013	673
Other expenses	622	12,381	4,905	2,947
Interest expense	881	17,516	14,133	9,825
Interest income	106	2,100	3,168	2,832
Foreign exchange (loss) gain, net	19	385	(2,467)	(248)
Monetary position gain, net	19	384	260	216
Market value loss on financial instruments	13	264	320	355
Income before income taxes from continuing operations and share in the profit of equity accounted investees	970	19,311	32,296	33,630
Income taxes	745	14,819	10,476	10,169
Share in the profit of equity accounted investees, net of tax	(37)	(736)	6,228	6,252
Net income from continuing operations	188	3,756	28,048	29,713
Net income from discontinued operations \| $				3,366
CONSOLIDATED NET INCOME	188	3,756	28,048	33,079
Controlling interest from continuing operations	(98)	(1,930)	20,699	22,560
Controlling interest from discontinued operations \| $				1,430
Non-controlling interest from continuing operations	$ 286	$ 5,686	$ 7,349	7,153
Non-controlling interest from discontinued operations \| $				$ 1,936
Series B shares [member]
Basic earnings per share of continuing operations
Basic earnings per share of continuing operations \| (per share)	$ 0.05	$ 1.03	$ 1.13	$ 2.04
Basic earnings per share of discontinued operations
Basic earnings per share of discontinued operations			0.07	0.08
Diluted earnings per share of continuing operations
Diluted earnings per share of continuing operations \| (per share)	0.05	1.03	1.13	2.04
Diluted earnings per share of discontinued operations
Diluted earnings per share of discontinued operations			0.07	0.08
Series D shares [member]
Basic earnings per share of continuing operations
Basic earnings per share of continuing operations \| (per share)	0.07	1.29	1.41	2.55
Basic earnings per share of discontinued operations
Basic earnings per share of discontinued operations			0.09	0.10
Diluted earnings per share of continuing operations
Diluted earnings per share of continuing operations \| (per share)	$ 0.07	$ 1.29	1.41	2.55
Diluted earnings per share of discontinued operations
Diluted earnings per share of discontinued operations			$ 0.09	$ 0.10

Consolidated Statements of Comprehensive Income $ in Millions, $ in Millions	12 Months Ended
	Dec. 31, 2020 USD ($)	Dec. 31, 2020 MXN ($)	Dec. 31, 2019 MXN ($)	Dec. 31, 2018 MXN ($)
Statement [Line Items]
CONSOLIDATED NET INCOME	$ 188	$ 3,756	$ 28,048	$ 33,079
Items that will be reclassified to consolidated net income in subsequent periods, net of tax:
Valuation of the effective portion of derivative financial instruments	83	1,654	(980)	(592)
Income (loss) on hedge of net investments in foreign operations	53	1,060	991	724
Exchange differences on the translation of foreign operations and equity accounted investees	25	489	(12,556)	(13,174)
Share of other comprehensive income (loss) of equity accounted investees	(299)	(5,948)	1,058	(360)
Total items that will be reclassified	(138)	(2,745)	(11,487)	(13,402)
Items that will not to be reclassified to consolidated net income in subsequent periods, net of tax:
Loss due to changes in the fair value in equity financial instruments	(201)	(3,991)		(1,039)
Share of other comprehensive income (loss) of equity accounted investees	(6)	(111)	(389)	597
Remeasurements of the net defined benefit liability	(24)	(474)	(1,090)	551
Total items that will not be reclassified	(231)	(4,576)	(1,479)	109
Total other comprehensive income	(369)	(7,321)	(12,966)	(13,293)
Consolidated comprehensive income, net of tax	(181)	(3,565)	15,082	19,786
Comprehensive income attributable to [abstract]
Controlling interest comprehensive income	(176)	(3,458)	12,331	14,776
Controlling interest comprehensive income	(176)	(3,458)	12,285	14,776
Non-controlling interest comprehensive income	(5)	(107)	2,751	5,010
Non-controlling interest comprehensive income	(5)	(107)	2,797	5,010
Controlling comprehensive income from continuing operations, net of tax	(176)	(3,458)	12,285	4,540
Controlling comprehensive income from discontinued operations, net of tax				4,804
Non-controlling comprehensive income from continuing operations, net of tax	$ (5)	$ (107)	2,797	10,236
Non-controlling comprehensive income from discontinued operations, net of tax				$ 206
Farmacias Yza [member]
Comprehensive income attributable to [abstract]
Reattribution to non-controlling interest of other comprehensive income by acquisition			3
Reattribution from controlling interest of other comprehensive income by acquisition			(3)
Grupo Socofar [member]
Comprehensive income attributable to [abstract]
Reattribution to non-controlling interest of other comprehensive income by acquisition			(49)
Reattribution from controlling interest of other comprehensive income by acquisition			$ 49

Consolidated Statements of Changes in Equity $ in Millions, $ in Millions	Capital stock [member] MXN ($)	Additional paid-in capital [member] MXN ($)	Retained earnings [member] MXN ($)	Fair value in equity financial instrument [member] MXN ($)	Valuation of the effective portion of derivative financial instrument [member] MXN ($)	Exchange differences on the translation of foreign operations and equity accounted investees [member] MXN ($)	Remeasurements of the net defined benefit liability [member] MXN ($)	Non-controlling interest [member] MXN ($)	Total controlling interest [member] MXN ($)	USD ($)	MXN ($)
Beginning Balance (Previously stated [member]) at Dec. 31, 2017	$ 3,348	$ 26,808	$ 201,868		$ 2,618	$ 18,207	$ (2,558)	$ 86,621	$ 250,291		$ 336,912
Beginning Balance (IAS 29 [member]) at Dec. 31, 2017			1,269					1,418	1,269		2,687
Beginning Balance (Accounting standard adoption effects [member]) at Dec. 31, 2017								(150)
Beginning Balance (Adjusted balance [member]) at Dec. 31, 2017	3,348	26,808	202,908		2,618	18,207	(2,558)	87,889	251,331		339,220
Beginning Balance (I F R S 9 [Member]) at Dec. 31, 2017			(229)					(150)	(229)		(379)
Beginning Balance at Dec. 31, 2017								86,621
Consolidated net income			23,990					9,089	23,990		33,079
Other comprehensive income (loss), net, excluding sale of joint venture				$ (491)	(727)	(8,988)	992	(4,079)	(9,214)		(13,293)
Consolidated comprehensive income, net of tax			23,990	(491)	(727)	(8,988)	992	5,010	14,776		19,786
Dividends declared and paid			(9,220)					(3,713)	(9,220)		(12,933)
Issuance (purchase) of share-based compensation plans		42						31	42		73
Other acquisitions and remeasurements								413
Contribution from non-controlling interest								412			412
Recognition of non-controlling interest upon consolidation of CCFPI								(11,140)
Derecognition upon disposal of controlling interest in Philippines								(11,140)			(11,140)
Other movements in equity accounted investees, net of tax			124						124		124
Ending Balance (Previously stated [member]) at Dec. 31, 2018	3,348	26,850	217,802	(491)	1,891	9,219	(1,566)	78,489	257,053		335,542
Ending Balance (Accounting standard adoption effects [member]) at Dec. 31, 2018								(69)
Ending Balance (Adjusted balance [member]) at Dec. 31, 2018	3,348	26,850	217,709	(491)	1,891	9,219	(1,566)	78,420	256,960		335,380
Ending Balance (I F R I C 23 [Member]) at Dec. 31, 2018			(93)					(69)	(93)		(162)
Ending Balance at Dec. 31, 2018								78,489
Consolidated net income			20,699					7,349	20,699		28,048
Other comprehensive income (loss), net, excluding sale of joint venture					(562)	(6,647)	(1,205)	(4,552)	(8,414)		(12,966)
Consolidated comprehensive income, net of tax			20,699		(562)	(6,647)	(1,205)	2,797	12,285		15,082
Dividends declared and paid			(9,692)					(3,945)	(9,692)		(13,637)
Issuance (purchase) of share-based compensation plans		33						(12)	33		21
Other acquisitions and remeasurements								32			32
Acquisition of non-controlling interest								(3,530)
Other acquisition of non-controlling interest		(8,721)			32	17	(3)	(3,530)	(8,675)		(12,205)
Other movements in equity accounted investees, net of tax			1,078						1,078		1,078
Ending Balance at Dec. 31, 2019	3,348	18,162	229,794	(491)	1,361	2,589	(2,774)	73,762	251,989		325,751
Consolidated net income			(1,930)					5,686	(1,930)	$ 188	3,756
Other comprehensive income (loss), net, excluding sale of joint venture				(3,991)	1,306	1,673	(416)	(5,681)	(1,428)		(7,109)
Sale of Joint Venture						(100)		(112)	(100)		(212)
Consolidated comprehensive income, net of tax			(1,930)	(3,991)	1,306	1,573	(416)	(107)	(3,458)	(181)	(3,565)
Dividends declared and paid			(10,360)					(5,524)	(10,360)		(15,884)
Issuance (purchase) of share-based compensation plans		(275)						(64)	(275)		(339)
Other acquisitions and remeasurements		(79)						1,377	(79)		1,298
Acquisition of non-controlling interest								(1,298)
Other movements in equity accounted investees, net of tax			(74)						(74)		(74)
Ending Balance at Dec. 31, 2020	$ 3,348	$ 17,808	$ 217,430	$ (4,482)	$ 2,667	$ 4,162	$ (3,190)	$ 69,444	$ 237,743	$ 15,442	$ 307,187

Consolidated Statements of Cash Flow $ in Millions, $ in Millions	12 Months Ended
	Dec. 31, 2020 USD ($)	Dec. 31, 2020 MXN ($)	Dec. 31, 2019 MXN ($)	Dec. 31, 2018 MXN ($)
OPERATING ACTIVITIES
Income before income taxes from discontinued operations				$ 1,308
Income before income taxes from continuing operations	$ 934	$ 18,575	$ 38,524	39,882
Non-cash items adjustments:
Operating (income) expenses	(78)	(1,544)	(1,279)	1,687
Depreciation	1,257	25,006	23,361	14,698
Amortization	153	3,043	2,449	2,539
(Gain) loss on sale of long-lived assets	(7)	(130)	68	(174)
Disposal of long-lived assets	65	1,290	861	518
Impairment Loss Excluding Intangible Assets And Other	256	5,102	1,018	432
Share of the profit of equity accounted investees, net of taxes	37	736	(6,228)	(6,252)
Interest income	(106)	(2,100)	(3,168)	(2,832)
Interest expense	881	17,516	14,133	9,825
Foreign exchange loss (gain), net	(19)	(385)	2,467	248
Monetary position (gain), net	(19)	(384)	(260)	(216)
Market value loss on financial instruments	13	264	320	355
Net cash flow from operating activities before changes in operating accounts	3,367	66,989	72,266	60,710
Trade accounts receivable and other current assets	128	2,551	(2,818)	(2,426)
Other current financial assets	2	31	(268)	379
Inventories	(12)	(247)	(5,635)	(3,809)
Derivative financial instruments	6	124	41	(23)
Trade accounts payable and other accounts	(93)	(1,847)	10,230	4,906
Other non-current liabilities	45	901	345	752
Other current financial liabilities	51	1,015	158	(544)
Employee benefits paid	(49)	(981)	(790)	(412)
Net cash generated from operations	3,445	68,536	73,529	59,533
Income taxes paid	(772)	(15,363)	(11,891)	(12,603)
Net cash generated by operating activities from discontinued operations				654
Net cash generated by operating activities from continuing operations	2,673	53,173	61,638	46,930
INVESTING ACTIVITIES
Proceeds from the sale of subsidiary, net of cash disposed				7,649
Acquisition by Coca-Cola FEMSA, net of cash acquired (see Note 4)				(5,692)
Equity accounted investees	(105)	(2,095)	(2,516)	(98)
Other equity investments	(284)	(5,644)	(14,419)
Disposal (purchase) of investments	711	14,149	29,381	(40,487)
Interest received	106	2,106	3,253	2,736
Derivative financial instruments	(10)	(191)	(203)	99
Dividends received from equity accounted investees	210	4,180	3,026	2,927
Property, plant and equipment acquisitions	(938)	(18,660)	(22,926)	(21,584)
Proceeds from disposal of property, plant and equipment	23	461	655	467
Acquisition of intangible assets	(75)	(1,482)	(2,197)	(1,793)
Investment in other assets	(54)	(1,082)	(1,179)	(1,182)
Collections of other assets	26	526	415	166
Investment in other financial assets	(11)	(214)	(285)	(65)
Net cash (used in) generated by investing activities from discontinued operations				(962)
Net cash (used in) generated by investing activities from continuing operations	(1,579)	(31,367)	(14,131)	(57,178)
FINANCING ACTIVITIES
Proceeds from borrowings	6,504	129,371	18,280	16,155
Payments of bank loans	(3,181)	(63,278)	(26,301)	(17,182)
Interest paid	(483)	(9,615)	(6,503)	(6,799)
Derivative financial instruments	54	1,078	(690)	(2,288)
Dividends paid	(798)	(15,868)	(13,629)	(12,933)
Acquisition of non-controlling interest	(588)	(11,692)	(728)
Interest paid derived from leases	(230)	(4,568)	(4,498)
Payments of leases	(264)	(5,242)	(4,350)
Other financing activities	(31)	(611)	(15)	36
Net cash used in financing activities from discontinued operations				(37)
Net cash (used) generated by financing activities from continuing operations	983	19,575	(38,434)	(23,011)
Increase (decrease) in cash and cash equivalents from continuing operations	2,077	41,381	9,073	(33,259)
Increase in cash and cash equivalents from discontinued operations				963
Cash and cash equivalents at the beginning of the period	3,296	65,562	62,047	96,944
Effects of exchange rate changes and inflation effects on cash and cash equivalents held in foreign currencies	37	681	(5,558)	(2,601)
Cash and cash equivalents at the end of the period	5,410	107,624	65,562	62,047
Synergy [Member]
INVESTING ACTIVITIES
Other acquisitions, net of cash acquired (see Note 4)	(1,171)	(23,284)
Other acquisitions [member]
INVESTING ACTIVITIES
Other acquisitions, net of cash acquired (see Note 4)	$ (7)	$ (137)	$ (7,136)	$ (321)

Company Business

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Company Business

Note 1. Company Business

Fomento Económico Mexicano, S.A.B. de C.V. and subsidiaries (“FEMSA,” the Company or the Group), incorporated in 1936, is a public company established as a sociedad anónima bursátil de capital variable under the Mexican laws leading subsidiaries that are direct and indirect sub-holding companies in businesses in which the Company operates in the beverage industry through Coca-Cola FEMSA; retail industry through FEMSA Comercio Proximity, Fuel and Health Divisions; beer industry through the Heineken investment and other businesses.

The following is a description of the Company’s businesses, along with its interest ownership in each reportable segment:


	% Ownership
Business	2020		2019		Activities
Coca-Cola FEMSA, S.A.B. de C.V. and subsidiaries (“Coca-Cola FEMSA”)	47.2% (56.0% of the voting shares)	(1)	47.2% (63.0% of the voting shares)	(1)	Production, distribution and marketing of certain Coca-Cola trademark beverages in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela, Brazil, Argentina and Uruguay (see Note 4). As of December 31, 2020, The Coca-Cola Company (“TCCC”) indirectly owns 27.8% of Coca-Cola FEMSA’s capital stock. In addition, shares representing 25% of Coca-Cola FEMSA’s capital stock are traded on the Bolsa Mexicana de Valores (Mexican Stock Exchange “BMV”) and on the New York Stock Exchange, Inc. (“NYSE”) in the form of American Depositary Shares (“ADS”).
FEMSA Comercio – Proximity Division	100%		100%		Small-box retail chain format operations in Mexico, Colombia, Peru, United States, Chile and Brazil, mainly under the trade name “OXXO.”
FEMSA Comercio – Fuel Division	100%		100%		Retail service stations for fuels, motor oils, lubricants and car care products under the trade name “OXXO Gas” with operations in Mexico.
FEMSA Comercio – Health Division	100%	(2)	Various	(2)	Drugstores operations in Chile, Colombia and Ecuador, mainly under the trademark “Cruz Verde”, “Fybeca” and “Sana Sana”; and in Mexico under various brands such as “YZA”,” La Moderna” and “Farmacon.”
Heineken investment	14.8%		14.8%		Heineken N.V. and Heineken Holding N.V. shares, which represents an aggregate of 14.8% economic interest in both entities (“Heineken Group”).
Other businesses	Various (3)		100%		Companies engaged in the production and distribution of coolers, commercial refrigeration equipment, plastic cases, food processing, preservation and weighing equipment; logistic transportation and maintenance services to FEMSA’s subsidiaries and to third parties; as well as a specialized distribution platform for cleaning products and consumables.

(1)

The Company controls Coca-Cola FEMSA’s relevant activities. On January 31, 2019, Coca-Cola FEMSA, S.A.B. de C.V. Extraordinary General Shareholders’ Meeting approved the following: (i) an eight-for-one stock split (the “Stock Split”) of each series of shares of the Company; (ii) the issuance of Series B ordinary shares with full voting rights; and (iii) the creation of units, comprised of 3 Series B shares and 5 Series L shares, to be listed for trading on the Mexican Stock Exchange and in the form of American depositary shares on the New York Stock Exchange.

(2)

The former shareholders of Farmacias YZA had a 18.6% stake in Cadena Comercial de Farmacias, S.A.P.I. de C.V., a subsidiary of FEMSA that holds all pharmacy business in Mexico (which we refer to as “CCF”). On November 13, 2019, FEMSA completed the acquisition of the remaining interest in Farmacias YZA. In 2018, FEMSA had 60% interest on Grupo Socofar (“Socofar”). As of December 13, 2019, FEMSA recognized the remaining 40% interest in Grupo Socofar (“Socofar”) following the exercise of a put right by the minority partner to sell its non - controlling interest in Socofar.

(3)

On May 15, 2020, the Company completed the acquisition of the specialized distribution business of cleaning products and consumables in the United States, through the controlling interest of NW Synergy, which includes WAXIE and North American Corporation (“North American”). Additionally, on December 31, 2020, the Company completed the acquisition of Southeastern Paper Group (“SEPG”), increasing its specialized distribution footprint in the United States. See Note 4.1.

Basis of Preparation

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Basis of Preparation

Note 2. Basis of Preparation

2.1 Statement of compliance

The consolidated financial statements of the Company as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The Company’s consolidated financial statements and notes were authorized for issuance by the Company’s Chief Executive Officer Eduardo Padilla Silva and the Chief Corporate Financial Officer Eugenio Garza y Garza on February 24, 2021. These consolidated financial statements and notes were then approved by the Company’s Board of Directors on February 26, 2021 and by the Shareholder meeting on March 24, 2021. The accompanying 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 Corporate Financial Officer on April 14, 2021 and subsequent events have been considered through that date (see Note 30).

2.2 Basis of measurement and presentation

COVID‑19, an infectious disease caused by a new virus, was declared a world‑wide pandemic by the WHO on 11 March 2020. The measures to slow the spread of COVID‑19 have had a significant impact on the global economy.

The COVID-19 pandemic has also caused and continues to cause significant volatility in the financial markets, undermining investors’ confidence in the growth of countries and businesses. Major stock markets have halted operations on several occasions as persistent market turmoil intensifies and new information becomes available. Currencies in many of the countries where we operate, including the Mexican peso, have suffered a significant depreciation against the U.S. dollar as compared to December 31, 2019, which has increased the cost of some of our raw materials, and therefore negatively affected our financial results. In addition, the long-term economic effects of the COVID-19 pandemic may include lower or negative growth rates in the markets where we operate and reduced demand for our products or a shift to lower margin products. The COVID-19 pandemic has also increased the interest rates for short-term loans, and these market conditions, if persisting for an extended duration, could affect our costs of financing. Furthermore, the duration of the COVID-19 pandemic is uncertain, and we cannot predict whether the virus will continue spreading in the territories where we operate or when or if the pandemic will subside.

During the COVID-19 pandemic, governments have implemented several preventive measures such as social distancing and the temporary closure of certain points of sale considered as non-esential. As such measures were relaxed, most businesses were able to reopen and this allowed us to recover the accounts receivable. Given that the impact in this item was not material, the Company did not implement any relevant change to our models to estimate the receivables’ provisions.

In regard to the above, the following are considerations that support our going concern basis of accounting:

Consideration of the entity’s business model and related risks.

Whether the entity has sufficient cash and/or headroom in its credit facilities to support any downturn whilst noting that the evolving nature of the COVID-19 pandemic means that uncertainties will remain, and it may not be able to reasonably estimate the future impact.

Actions the entity has taken to mitigate the risk that the going concern assumption is not appropriate such as activities to preserve liquidity.

Any challenges of the underlying data and assumptions used to make the going concern assessment.

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

Derivative financial instruments.

Trust assets of post-employment and other long-term employee benefit plans.

Investments in equity instruments and some financial liabilities.

The carrying values of assets and liabilities designated as hedged items in fair value hedges that would otherwise be carried at amortized cost are adjusted to record changes in the fair values attributable to the risks that are being hedged in effective hedge relationship.

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

2.2.1 Presentation of consolidated income statement

The Company’s consolidated income statement classifies its related costs and expenses by function accordingly within the industry practices in which 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 statement of financial position, as of December 31, 2020 the consolidated income statement, the consolidated statement of comprehensive income and consolidated statement of cash flows for the year ended December 31, 2020 were converted into U.S. dollars at closing exchange rate of 19.8920 Mexican pesos per U.S. dollar as published by the Federal Reserve Bank of New York as of December 31, 2020. This arithmetic conversion should not be construed as representation that amounts expressed in Mexican pesos may be converted into U.S. dollars at that or any other exchange rate.

As explained in Note 2.1 above, as of April 9, 2021 the exchange rate was Ps. 20.1620 per U.S. dollar, a depreciation of 1% since December 31, 2020.

2.3 Critical accounting judgments and estimates

For the application of the Company’s accounting policies, as 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 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 it affects only such period or in the current or subsequent periods of the revision if this affects both.

Judgments

In the process of applying the Company’s accounting policies, management has made the following judgments, the most significant effects of which are included on consolidated financial statements.

2.3.1 Key sources of estimation uncertainty

The following are the assumptions and other sources of estimation uncertainty as of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in the subsequent financial period. 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 would be included in the assumptions when they occur.

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

Intangible assets with indefinite lives including goodwill are subject to impairment tests annually or whenever indicators of impairment are present. An impairment exists when the carrying value of an asset or cash generating unit (“CGU”) 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 agreements 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 calculates an estimation of the value-in-use of the CGU to which such assets have been allocated. Impairment losses are recognized in current earnings for the excess of the carrying amount of the asset or CGU over its value-in-use in the period the related impairment is determined.

The Company assesses at each reporting date whether there is an indication that a long-lived 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 or CGU is considered impaired and is written down to its recoverable amount. In assessing value-in-use, the estimated future cash flows expected to be generated from the use of the asset or CGU 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.

Our forecasts assume our defensive profile and a recovery in the economic activity in the countries where we operate starting in 2021 and therefore, an improvement in sales volume. We expect the effects from the pandemic to be temporary and we estimate our industry will continue growing in the near term. Likewise, we will continue with the analyses of utilization levels of our assets, the recoverability of the accounts receivable, profitability of the business, etc. to identify any indications of impairment.

The key assumptions used to determine the recoverable amount for the Company’s CGUs, including a sensitivity analysis, are further explained in Notes 3.20 and 13.

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

Property, plant and equipment, including returnable bottles which are expected to provide benefits over a period of more than one year, as well as intangible assets with definite useful lives are depreciated/amortized over their estimated useful lives. The Company bases its estimates on the experience of its technical personnel as well as its experience in the industry for similar assets, see Notes 3.15, 3.18, 11 and 13.

2.3.1.3 Post-employment and other non-current employee benefits

The Company regularly evaluates the reasonableness of the assumptions used in its post-employment and other long-term employee benefit computations. Information about such assumptions is described in Note 17.

2.3.1.4 Income taxes

Deferred income tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. The Company recognizes deferred tax assets for unused tax losses and other credits and regularly reviews them for recoverability, based on its judgment regarding the probability of the timing and level of future taxable income, the expected timing of the reversals of existing taxable temporary differences and available tax planning strategies, see Note 25.

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 26. 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. Management’s judgment must be exercised to determine the likelihood of such a loss and an estimate of the amount, due to the subjective nature of the loss.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a tax authority will accept an uncertain tax treatment. The Company measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.

2.3.1.6 Valuation of financial instruments

The Company measures 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 21.

In the initial recognition of an equity instrument that is not held for trading, under the “other” business model, the Company may irrevocably choose to present changes in the fair value of the investment in other comprehensive income. This choice has to be made for each investment. Equity instruments are subsequently measured at fair value. Dividends are recognized as other income in results unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses, related to changes in fair value, are recognized in OCI and are considered items that will not be reclassified to consolidated net income in subsequent periods.

2.3.1.7 Business combinations

Businesses combinations 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 to, and liabilities assumed by the Company from the former owners of the acquiree, the amount of any non-controlling interest in 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 and measured 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 compensation arrangements of the acquiree or share-based compensation arrangements of the Company entered into to replace share-based compensation arrangements of the acquiree are measured in accordance with IFRS 2, Share-based Payment at the acquisition date, see Note 3.27;

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; and

Indemnifiable assets are recognized at the acquisition date on the same basis as the indemnified liability subject to any contractual limitations.

For each acquisition, management’s judgment must be exercised to determine the fair value of the assets acquired, the liabilities assumed and any non-controlling interest in the acquiree, applying estimates or judgments in techniques used, especially in forecasting CGU's cash flows, in the computation of weighted average cost of capital (“WACC”) and estimation of inflation during the identification of intangible assets with indefinite lives, mainly, goodwill, distribution and trademark rights, and estimation of useful life during the identification of intangible assets with definite lives, mainly, customer relationships.

2.3.1.8 Equity accounted investees

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 when assessing whether the Company has significant influence.

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

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

Whether the Company’s significant shareholders, fellow subsidiaries, or officers hold additional investment in the investee; and

Whether the Company is a part of significant investee’s board of director committees, such as the executive committee or the finance committee.

An arrangement can be a joint arrangement even though not all of its parties have joint control of the arrangement. When the Company is a party to an arrangement it assesses whether the contractual arrangement gives all the parties, or a group of the parties, control of the arrangement collectively; joint control exists only when decisions about the relevant activities require the unanimous consent of the parties that control the arrangement collectively. Management needs to apply judgment when assessing whether all the parties, or a group of the parties, have joint control of an arrangement. When assessing joint control, management considers the following facts and circumstances such as:

Whether all the parties or a group of the parties, control the arrangement, considering definition of joint control, as described in Note 3.14; and

Whether decisions about the relevant activities require the unanimous consent of all the parties, or of a group of the parties.

2.3.1.9 Venezuela exchange rates and deconsolidation

Effective December 31, 2017, the Company deconsolidated its Coca-Cola FEMSA subsidiary’s operations in Venezuela due to the political and economic environment in that country and began accounting for its investments under the fair value method. Consequently, beginning January 1, 2018, all changes in the fair value of the investment, including foreign currency translation differences are recognized for Venezuela’s operations in “Other comprehensive income, net of tax.”

2.3.1.10 Leases

Information on assumptions and estimates that have a significant risk of resulting in an adjustment to the carrying value of right-of-use assets and lease liabilities, and related statement of income accounts, include the following:

If the Company is reasonably certain to exercise an option to extend a lease agreement or not to exercise an option to terminate a lease agreement before its termination date, considering all the facts and circumstances that create an economic incentive for the Company to exercise, or not, such options, taking into account whether the lease option is enforceable and when the Company has the unilateral right to apply the option in question.

Determination of the non-cancellable period for evergreen contracts and lifelong leases, considering whether the Company is reasonably certain to terminate the lease and/or estimating a reasonable period for the use of the asset, based on significant leasehold improvements made on the leased properties that provide reasonable certainty to the Company about the remaining period to obtain the benefits of such improvements on leased properties.

2.4 Application of recently issued accounting standards

The Company has applied the following amendments to IFRS during 2020. None of the amendments had a significant impact on the company’s financial statements:

2.4.1 Modifications to the Conceptual Framework

The Conceptual Framework for Financial Information (“Conceptual Framework”) was issued on March 2018 replacing the previous version of the Conceptual Framework issued in 2010. The Conceptual Framework describes the purpose and concepts of general purpose for the financial information. The purpose of the Conceptual Framework is to:

a) Help to the IASB to develop standards that are based on consistent concepts;

b) Assist to preparers to develop congruent accounting policies when no Standard is applicable to a specific transaction or event, or when a Standard allows an accounting policy option; and

c) Help to all parties to understand and interpret the Standards.

The Conceptual Framework is not a Standard. No content of the Conceptual Framework prevails over any Standard or requirement of a Standard. As long as the Company’s accounting policy is in line with these modifications, the Company did not have any effect on its consolidated financial statements.

2.4.2 Modifications to IFRS 3 Definition of a Business (“IFRS 3”)

The IASB issued an amendment to IFRS 3 in October 2018 that revises the definition of a business. The modified definition issued in October 2018 emphasizes that the purpose of a business is to provide goods and services to the customers, while the previous definition was focus on returns in dividends, lower costs or other economic benefits for investors and others. The distinction between a business and a group of assets is important because an acquirer recognizes a goodwill when a business is acquired. As long as the Company’s accounting policy is aligned with these modifications, the Company did not have any effect on its consolidated financial statements.

2.4.3 Modifications to IAS 1 and IAS 8 Definition of Material or relative importance (“IAS 1” and “IAS 8”)

The definition of material or relative importance helps to the Company to determine whether information about an item, transaction or other event should be provided to the users of the financial statements. However, companies had difficulty using the above definition in making judgments in the preparation of the financial statements. Accordingly, the IASB published the Definition of Material or Relative Importance (Amendments to IAS 1 and IAS 8) in October 2018.

a. Previous definition:

Omissions of information or inaccuracies are material, or have relative importance if they can, individually or in whole, influence in the economic decisions taken by the users of the information on the base of the financial statements.

b. New definition:

Information is material if its omission, inaccuracy or concealment can reasonably be expected to influence the decisions that the principal users of the financial information take on the basis of the financial statements.

The definition of “material” in the IAS 8 is replaced by a reference to the IAS 1. In addition, to ensure consistency, the IASB has modified the rest of the affected standards.

The Company did not have significant effects on its consolidated financial statements.

2.4.4 Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7

In September 2019, the IASB issued amendments to IFRS 9, IAS 39 and IFRS 7 Financial Instruments: Disclosures, which concludes phase one of its work to respond to the effects of Interbank Offered Rates (IBOR) reform on financial reporting. The amendments provide temporary reliefs which enable hedge accounting to continue during the period of uncertainty before the replacement of an existing interest rate benchmark with an alternative nearly risk-free interest rate (an RFR).

The amendments to IFRS 9

The amendments include a number of reliefs, which apply to all hedging relationships that are directly affected by the interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainties about the timing and/or amount of benchmark-based cash flows of the hedged item or the hedging instrument.

Application of the reliefs is mandatory. The first three reliefs require assessing:

whether a forecast transaction (or component thereof) is highly probable.

when to reclassify the amount in the cash flow hedge reserve to profit and loss.

the economic relationship between the hedged item and the hedging instrument.

For each of these reliefs, it is assumed that the benchmark on which the hedged cash flows are based (whether or not contractually specified) and/or, for relief three, the benchmark on which the cash flows of the hedging instrument are based, are not altered as a result of IBOR reform.

A fourth relief provides that, for a benchmark component of interest rate risk that is affected by IBOR reform, the requirement that the risk component is separately identifiable need be met only at the inception of the hedging relationship. Where hedging instruments and hedged items may be added to or removed from an open portfolio in a continuous hedging strategy, the separately identifiable requirement need only be met when hedged items are initially designated within the hedging relationship.

To the extent that a hedging instrument is altered so that its cash flows are based on an RFR, but the hedged item is still based on IBOR (or vice versa), there is no relief from measuring and recording any ineffectiveness that arises due to differences in their changes in fair value.

The reliefs continue indefinitely in the absence of any of the events described in the amendments. When an entity designates a group of items as the hedged item, the requirements for when the reliefs cease are applied separately to each individual item within the designated group of items.

The amendments also introduce specific disclosure requirements for hedging relationships to which the reliefs are applied. The Company did not have any effect on its consolidated financial statements.

2.4.5 Amendments to IFRS 16 COVID-19 Related Rent Concessions

The amendment allows an optional practical expedient that simplifies how tenants account for rental concessions, arising as a direct consequence for the COVID-19 pandemic.

The practical expedient can only be applied if:

• the new consideration is substantially equal to or lesser than the original consideration;

• the decrease in the lease payments refers to rental payments that occur before June 30, 2021; and

• no other substantive changes to the lease terms have been made.

Those lessees who apply this practical expedient must disclose:

• The fact that the practical expedient has been applied to all eligible rental concessions and, if applicable to some selected ones; the nature of the contracts to which they have applied it; and

• the amount recognized in results for the reporting period that arises from the application of the practical expedient.

This amendment does not provide a practical expedient for lessors. Lessors are required to continue evaluating whether the rental concessions are lease modifications and justify them accordingly.

Significant Accounting Policies

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Significant Accounting Policies

Note 3. Significant Accounting Policies

3.1 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Specifically, the Company controls an investee if and only if the Company has:

Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

Exposure, or rights, to variable returns from its involvement with the investee; and

The ability to use its power over the investee to affect its returns.

When the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

The contractual arrangements with the other vote holders of the investee;

Rights arising from other contractual arrangements; and

The Company’s voting rights and potential voting rights.

The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary are included in the consolidated financial statements from the date the Company gains control until the date the Company ceases to control the subsidiary.

Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Company and to the 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 into line with the Company’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Company are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Company loses control over a subsidiary, it:

Derecognizes the assets (including goodwill) and liabilities of the subsidiary.

Derecognizes the carrying amount of any non-controlling interests.

Derecognizes the cumulative translation differences recorded in equity.

Recognizes the fair value of the consideration received.

Recognizes the fair value of any investment retained.

Recognizes any surplus or deficit in profit or loss.

Reclassifies the parent’s share of components previously recognized in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Company had directly disposed of the related assets or liabilities.

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 shareholders’ equity as part of additional paid-in capital.

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. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Company elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets.

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’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets of the acquiree and the liabilities assumed. If, the net of the acquisition-date amounts of the identifiable assets of the acquiree 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.

Costs, other than those associated with the issuance 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, 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 in which the accounting is incomplete and discloses that its allocation is preliminary in nature. Those provisional amounts are adjusted retrospectively during the measurement period (not greater than 12 months from the acquisition date), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

Sometimes obtaining control of an acquiree in which equity interest is held immediately before the acquisition date is considered as a business combination achieved in stages also referred to as a step acquisition. The Company remeasures its previously held equity interest in the acquiree at its acquisition-date fair value and recognizes the resulting gain or loss, if any, in profit or loss. Also, the changes in the value of equity interest in the acquiree recognized in other comprehensive income shall be recognized on the same basis as required if the Company had disposed directly of the previously held equity interest, see Note 3.14.

The Company sometimes obtains control of an acquiree without transferring consideration. The acquisition method of accounting for a business combination, applies to those combinations as follows:

(a)

The acquiree repurchases a sufficient number of its own shares for the Company to obtain control.

(b)

Minority veto rights lapse that previously kept the Company from controlling an acquiree in which it held the majority voting rights.

(c)

The Company and the acquiree agree to combine their businesses by contract alone in which it transfers no consideration in exchange for control and no equity interest is held in the acquiree, either on the acquisition date or previously.

3.3 Foreign currencies, consolidation of foreign subsidiaries and accounting of equity accounted investees

In preparing the financial statements of each individual subsidiary and accounting for equity accounted investees, transactions in currencies other than the individual entity’s functional currency (foreign currencies) are recognized at the exchange rates 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 retranslated.

Exchange differences on monetary items are recognized in consolidated net income in the period in which they arise except for:

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

Intercompany financing balances with foreign subsidiaries are classified as long-term investments when there is no plan to pay such financing in the foreseeable future. Exchange rate fluctuation regarding this financing is recorded in the exchange differences on translation of foreign operations within the accumulated other comprehensive income (loss) item, which is recorded in equity; and

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

Foreign exchange differences on monetary items are recognized in profit or loss. Their classification in the income statement depends on their nature. Differences arising from fluctuations related to operating activities are presented in the “other expenses” line (see Note 20) while fluctuations related to non-operating activities such as financing activities are presented as part of “foreign exchange gain (loss)” line in the income statement.

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

For entities operating in hyperinflationary economic environments, the inflation effects of the origin country are recognized pursuant to IAS 29 Financial Reporting in Hyperinflationary Economies, 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 entities operating in non-hyperinflationary 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 if the exchange rate does not fluctuate significantly.

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 in equity to its shareholders.


		Exchange Rates of Local Currencies Translated to Mexican Pesos (1)
	Functional /	Average Exchange Rate for			Exchange Rate as of
	Recording				December 31,	December 31,
Country or Zone	Currency	2020	2019	2018	2020	2019
Guatemala	Quetzal	2.78	2.50	2.56	2.56	2.45
Costa Rica	Colon	0.04	0.03	0.03	0.03	0.03
Panama	U.S. dollar	21.49	19.26	19.24	19.95	18.85
Colombia	Colombian peso	0.01	0.01	0.01	0.01	0.01
Nicaragua	Cordoba	0.63	0.58	0.62	0.57	0.56
Argentina	Argentine peso	0.31	0.41	0.73	0.24	0.31
Brazil	Reais	4.18	4.89	5.29	3.84	4.68
Chile	Chilean peso	0.03	0.03	0.03	0.03	0.03
Euro Zone	Euro (€)	24.48	21.56	22.71	24.52	21.12
Peru	Nuevo Sol	6.15	5.77	5.85	5.51	5.68
Ecuador	U.S. dollar	21.49	19.26	19.24	19.95	18.85
Philippines	Philippine peso	—	—	0.37	—	—
United States	U.S. dollar	21.49	—	—	19.95	—
Uruguay	Uruguayan peso	0.51	0.55	0.63	0.47	0.51

(1)

Exchange rates published by the Central Bank of each country where the Company operates.

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 subsidiaries that operate 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, net, intangible assets, net 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 subsidiary on the dates such capital was contributed, or income was generated up to the date the consolidated financial statements are presented; and

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

The Company restates the financial information of subsidiaries that operate in hyperinflationary economic environment using the consumer price index of each country (“CPI”).

As of December 31, 2020, 2019, and 2018, the operations of the Company are classified as follows:


	Cumulative			Cumulative			Cumulative
	Inflation			Inflation			Inflation
Country	2018- 2020		Type of Economy	2017- 2019		Type of Economy	2016- 2018		Type of Economy
Mexico	11.2	%	Non-hyperinflationary	13.2	%	Non-hyperinflationary	15.7	%	Non-hyperinflationary
Guatemala	10.9	%	Non-hyperinflationary	11.8	%	Non-hyperinflationary	12.2	%	Non-hyperinflationary
Costa Rica	4.5	%	Non-hyperinflationary	5.8	%	Non-hyperinflationary	5.7	%	Non-hyperinflationary
Panama	(1.5)	%	Non-hyperinflationary	0.5	%	Non-hyperinflationary	2.1	%	Non-hyperinflationary
Colombia	8.8	%	Non-hyperinflationary	11.0	%	Non-hyperinflationary	13.4	%	Non-hyperinflationary
Nicaragua	13.5	%	Non-hyperinflationary	15.6	%	Non-hyperinflationary	13.1	%	Non-hyperinflationary
Argentina (a)	209.2	%	Hyperinflationary	179.4	%	Hyperinflationary	158.4	%	Hyperinflationary
Brazil	13.1	%	Non-hyperinflationary	11.1	%	Non-hyperinflationary	25.0	%	Non-hyperinflationary
Philippines	—		—	—	%	Non-hyperinflationary	11.9	%	Non-hyperinflationary
Euro Zone	2.4	%	Non-hyperinflationary	3.6	%	Non-hyperinflationary	2.7	%	Non-hyperinflationary
Chile	8.8	%	Non-hyperinflationary	8.3	%	Non-hyperinflationary	9.7	%	Non-hyperinflationary
Peru	6.2	%	Non-hyperinflationary	5.2	%	Non-hyperinflationary	9.3	%	Non-hyperinflationary
Ecuador	(0.7)	%	Non-hyperinflationary	0.3	%	Non-hyperinflationary	30.3	%	Non-hyperinflationary
United States	3.7	%	Non-hyperinflationary	—		—	—		—
Uruguay	28.5	%	Non-hyperinflationary	22.0	%	Non-hyperinflationary	25.3		Non-hyperinflationary

a)Argentina

Beginning on July 1, 2018, Argentina became a hyperinflationary economy because, among some other economic factors, the last three years’ cumulative inflation in Argentina exceeded 100% according to the several economic indexes that exist in the country. For being considered hyperinflationary, the financial information for our Argentine subsidiary has been adjusted to recognize the inflationary effects since January 1, 2018 through:

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

Recognizing the monetary position gain or loss in consolidated net income.

The Federacion Argentina de Consejos Profesionales de Ciencias Económicas (“FACPCE”) approved on September 29, 2018 and published on October 5, 2018, a resolution which defines, among other things, that the index price to determine the restatement coefficient (Based on a series that applies the NCPI from January with the IPIM until this date, and computing November and December 2015 using the CPI – of Ciudad del Gran Buenos Aires (“CGBA”) variation).

3.5 Cash and cash equivalents and restricted cash

Cash is comprised of deposits in bank accounts which generate an interest on the available balance. Cash equivalents are mainly represented by short-term bank deposits and fixed-income investments (overnight), both with maturities of three months or less and their carrying values approximate fair value.

The Company also maintains restricted cash which is pledged as collateral to meet certain contractual obligations. Restricted cash is presented within other current financial assets given that, by their nature, the restrictions are short-term.

3.6 Investments

The investments include debt securities and bank deposits with a maturity of more than three months as of the acquisition date.

Management determines the appropriate classification of investments at the time of purchase and evaluates that classification at the date of each statement of financial position, see Notes 6 and 14.

3.7 Financial assets

Financial assets are classified within the following business models depending on management’s objective: (i) “held to maturity to recover cash flows,” (ii) “held to maturity and to sell financial assets” and (iii) “others or held for trading,” including derivatives assigned in hedging instruments with efficient hedge, as appropriate. The classification depends on the nature and purpose of holding the financial assets and is determined at the time of initial recognition.

The Company performs a portfolio – level assessment of the business model in which a financial asset is managed to accomplish with Company’s risk management purposes. The information that is considered within the evaluation includes:

The policies and objectives of the Company in relation to the portfolio and the practical implementation of policies;

Performance and evaluation of the Company’s portfolio including accounts receivable;

Risks that affect the performance of the business model and how those risks are managed;

Any compensation related to the performance of the portfolio; and

Frequency, volume and timing of sales of financial assets in previous periods together with the reasons for said sales and expectations regarding future sales activities.

The Company’s financial assets include cash, cash equivalents and restricted cash, investments with maturities of more than three months, loans and accounts receivable, derivative financial instruments and other financial assets.

For the initial recognition of a financial asset, the Company measures it at fair value plus the transaction costs that are directly attributable to the purchase thereof, in the event that said asset is not measured at fair value through profit or loss. Accounts receivable that do not have a significant financing component are measured and recognized at the transaction price when they are generated. The rest of the financial assets are recognized only when the Company is part of the contractual provisions of the instrument.

The fair value of an asset is measured using assumptions that would be used by market participants when valuing the asset, assuming that the transaction is orderly and takes place in the principal or the most advantageous market for the asset.

During the initial recognition, the financial asset is also classified as measured at: amortized cost, fair value with changes in other comprehensive income – debt or equity investments – and fair value through profit or loss. The classification depends on the objective by which the financial asset is acquired.

Financial assets are not reclassified after their initial recognition unless the Company changes the business model to manage the financial assets; in which case, all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

3.7.1 Financial assets at amortized cost

A financial asset is measured at amortized cost if it meets the following two conditions and is notdesignated as fair value through profit and loss (“FVTPL”):

Its managed within a business model whose objective is to maintain financial assets to recover the contractual cash flows; and

The contractual terms are only payments at specified dates of the principal and interest on the amount of the outstanding principal, or solely payments of principal and interest (“SPPI”).

The amortized cost of a financial asset is the amount of the initial recognition less the principal payments, plus or less the accumulated amortization using the effective interest rate method of any difference between the initial amount and the amount as of the maturity and, for financial assets, adjusted for loss of impairment. The financial product, exchange fluctuation and impairment are recognized in results. Any profit or loss is also recognized in the same way in results.

3.7.2 Effective interest rate method (“ERR”)

The effective interest rate method consists of calculating the amortized cost of loans and accounts receivables and other financial assets (measured at amortized cost) and allocate 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.

3.7.3 Financial assets at fair value with changes in other comprehensive income (“FVOCI”)

A financial asset is measured at FVOCI if it meets the following two conditions and is not designated as FVTPL:

Its managed within a business model whose objective is achieved through the collection of contractual cash flows and the sale of financial assets; and

The contractual terms are solely principal and interest payments.

These assets are subsequently measured at fair value. The financial product calculated using the internal rate of return (“IRR”), the exchange fluctuation and the impairment are recognized in profit and loss. Other gains and losses, related to changes in fair value, are recognized in OCI. In case of disposals, the accumulated gains and losses in OCI are reclassified to profit and loss.

In the initial recognition of an equity instrument that is not held for trading, under the “other” business model, the Company may irrevocably choose to present changes in the fair value of the investment in OCI. This choice has to be made for each investment. Equity instruments are subsequently measured at fair value. Dividends are recognized as other income in results unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses, related to changes in fair value, are recognized in OCI and are not reclassified to consolidated net income in subsequent periods.

3.7.4 Financial assets at fair value through profit or loss (FVTPL)

Financial assets designated as FVTPL include financial assets held for trading and financial assets designated at initial recognition as FVTPL. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the short-term. Derivatives, including embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments as defined in IFRS 9. Financial assets designated a FVTPL are recorded in the balance sheet with changes in fair value presented as financial expense (net negative changes in fair value) or financial income (net positive changes in fair value) in profit or loss, including any dividend income.

3.7.5 Evaluation that contractual cash flows are solely principal and interest payments (“SPPI”)

In order to classify a financial asset within one of the three different categories, the Company determines whether the contractual cash flows of the asset are only principal and interest payments. The Company considers the contractual terms of the financial instrument and whether the financial asset contains any contractual term that could change the timing or amount of the contractual cash flows in such a way that it would not meet the SPPI criteria. In making this evaluation, the Company considers the following:

Contingent events that would change the amount or timing of cash flows;

Terms that can adjust the contractual coupon rate, including variable interest rate characteristics;

Payment and extension features; and

Characteristics that limit the Company's right to obtain cash flows from certain assets.

A prepaid feature is consistent with the characteristics of SPPI if the prepayment amount substantially represents the amounts of the principal and interest pending payment, which could include reasonable compensation for early termination of the contract. Additionally, a financial asset acquired or originated with a premium or discount to its contractual amount and in the initial recognition the fair value of the prepaid characteristic is insignificant, the asset will pass the test of the contractual characteristics of cash flow if the amount of prepaid represents substantially the contractual amount and accrued interest (but not paid); which may include additional compensation for the early termination of the contract.

3.7.6 Impairment of financial assets

The Company recognizes impairment due to expected credit loss (“ECL”) in:

Financial assets measured at amortized cost;

Debt investments measured at FVOCI; and

Other contractual assets.

Impairment losses on accounts receivable, contractual assets and leasing receivables are measured at the amount that equals the lifetime ECL, whether or not it has a significant financing component. The Company applies the criteria to all accounts receivable, contractual assets and leasing credits, together or separately.

The Company measures impairment losses at an amount equal to ECL for the remaining life, except for the following:

Debt instruments classified as low credit risk; and

Other debt instruments in which the credit risk (irrecoverability risk over the financial instrument expected life) has not increased significantly since the initial recognition.

In determining whether the credit risk of a financial asset has increased significantly since initial recognition and estimating the ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. It includes qualitative and quantitative analysis based on Company’s experience and credit assessment.

The impairment loss is a weighted estimate of the probability of expected loss. The amount of impairment loss is measured as the present value of any lack of liquidity (the difference between the contractual cash flows that correspond to the Company and the cash flows that management expects to receive). The expected credit loss is discounted at the original effective interest rate of the financial asset.

The Company annually evaluates if there was evidence of an impairment. Some observable data that financial assets were impaired includes:

Significant financial difficulty of the issuer or the borrower;

A breach of contract, such as default or past due event;

Granting concessions due to the borrower’s financial difficulties in which Company would not consider in other circumstances;

It is becoming probable that the borrower will enter bankruptcy or other financial reorganization;

The disappearance of an active market for a financial instrument because of financial difficulties; or

Information indicating that there was a measurable decrease in the expected cash flows of a group of financial assets.

For an equity instrument, evidence of impairment includes a significant decrease in its fair value even lower than its carrying value.

The impairment loss on financial assets measured at amortized cost is reduced from the book value and for financial assets measured at FVOCI, the impairment loss is recognized as profit or loss within OCI.

3.7.7 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.

3.7.8 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.

3.8 Other financial assets

Other financial assets include long-term accounts receivable, derivative financial instruments and recoverable contingencies acquired from business combinations. Long-term accounts receivable with a stated term are measured at amortized cost using the effective interest method, less any impairment.

3.9 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 FVTPL or FVOCI, 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. Changes in the fair value of derivative financial instruments are recorded each period in current earnings otherwise as a component of cumulative other comprehensive income based on the item being hedged and the effectiveness of the hedge.

3.9.1 Hedge accounting

The Company designates certain hedging instruments, which include derivatives to cover 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.

3.9.2 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 income statements.

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 income statement 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.

3.9.2.1 Fair value hedges

For hedged items carried at fair value, the change in the fair value of a hedging derivative is recognized in the consolidated income statement as foreign exchange gain or loss. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the consolidated income statement as foreign exchange gain or loss.

For fair value hedges relating to items carried at amortized cost, change in the fair value of the effective portion of the hedge is recognized first as an adjustment to the carrying value of the hedged item and then is amortized through profit or loss over the remaining term of the hedge using the EIR method. EIR amortization may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedged item is derecognized, the unamortized fair value is recognized immediately in profit or loss.

When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in profit and loss.

3.9.2.2 Hedge of net investment in a foreign business

The Company designates debt securities as a hedge of certain net investment in foreign subsidiaries and applies hedge accounting to foreign currency differences arising between the functional currency of its investments abroad and the functional currency of the holding company (Mexican peso), regardless of whether the net investment is held directly or through a sub-holding company.

Differences in foreign currency that arise in the conversion of a financial liability designated as a hedge of a net investment in a foreign operation are recognized in other comprehensive income in the exchange differences on the translation of foreign operations and associates caption, to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognized as market value gain or loss on financial instruments within the consolidated income statements. When part of the hedge of a net investment is disposed, the corresponding accumulated foreign currency translation effect is recognized as part of the gain or loss on disposal within the consolidated income statement.

3.10 Fair value measurement

The Company measures financial instruments, such as derivatives, and certain non-financial assets, at fair value at each balance sheet date. Also, fair values of financial instruments measured at amortized cost are disclosed in Notes 14 and 19.

Fair value is 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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place in either:

the principal market for the asset or liability; or

the absence of a principal market, in the most advantageous market for the asset or liability.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

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 — 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.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Company determines the policies and procedures for both recurring fair value measurements, such as those described in Note 21 and unquoted liabilities such as debt described in Note 19.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

3.11 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 that is incurred when purchasing or producing a product and are based on the weighted average cost formula. The operating segments of the Company use inventory costing methodologies to value their inventories, such as the weighted average cost method in Coca-Cola FEMSA, retail method (a method to estimate the average cost) in FEMSA Comercio – Proximity, FEMSA Comercio – Health Division; and acquisition method in FEMSA Comercio – Fuel Division, except for the distribution centers which are valued with the average cost method.

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 and inspection; expenses related to the purchase of goods and services used in the sale process of the Company’s products and expenses related to the purchase of gasoline, diesel and all engine lubricants used in the sale process of the Company.

Management is required to make judgments regarding write-downs to determine the net realizable value of the inventory. These write-downs consider factors such as age and condition of goods as recent market data to assess the estimated future demand for goods. To date the COVID-19 pandemic has not had a material impact on the Company´s assessment of the net realizable value of the inventory, with inventory turns remaining similar since the commencement of the pandemic.

3.12 Loans and receivables

The instruments under this category includes loans, trade receivables, and other accounts receivables measured at amortized cost which represents future cash flows discounted at the effective interest rate on the transaction date.

In addition, an expected credit loss model is applied to this category, which is reported net of this impairment allowance in the financial statements. The allowance amount is not significant because the trade accounts receivable are usually recovered in the short-term.

Interest income is recognized by applying the effective interest rate except for current receivables, considering that the recognition of interest is immaterial. For the years ended December 31, 2019, 2018 and 2017 there was no interest income on loans and receivables.

3.13 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 product promotion agreements with customers.

Prepaid assets principally consist of advances to suppliers of raw materials, advertising, promotional, leasing and insurance costs, and are recognized as other current assets at the time of the cash disbursement. Prepaid assets are carried to the appropriate caption in the income statement when inherent benefits and risks have already been transferred to the Company or services have been received.

The Company has prepaid advertising costs which consist of television and radio advertising airtime 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 the consolidated income statement as incurred.

Coca-Cola FEMSA has agreements with customers for the right to sell and promote Coca-Cola FEMSA’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, 2020, 2019 and 2018, such amortization aggregated to Ps. 213, Ps. 273 and Ps. 277, respectively.

3.14 Equity accounted investees

Associates are those entities over 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 those policies. Upon loss of significant influence over the associate, the Company measures and recognizes any retained investment at its fair value.

Investments in associates are accounted for using the equity method and initially recognized at cost, which comprises the investment’s purchase price and any directly attributable expenditure necessary to acquire it. The carrying value of the investment is adjusted to recognize changes in the Company’s shareholding of the associate since the acquisition date. The financial statements of the associates are prepared for the same reporting period as the Company.

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.

Profits and losses resulting from 'upstream' and 'downstream' transactions between the Company (including its consolidated subsidiaries) and an associate are recognized in the consolidated financial statements only to the extent of unrelated investors' interests in the associate. 'Upstream' transactions are, for example, sales of assets from an associate to the Company. 'Downstream' transactions are, for example, sales of assets from the Company to an associate. The Company’s share in the associate’s profits and losses resulting from these transactions is eliminated.

When the Company’s share of losses exceeds the carrying amount of the investment in the associate, including any advances, 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 to pay the associate or has to make 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 an associate is measured 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. The Company determines at each reporting date whether there is any objective evidence that the investment in the associates is impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the investment 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 income statements.

If an investment interest is reduced, but continues to be classified as an associate, the Company reclassifies to profits or losses the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to the reduction in ownership interest if the gain or loss would be required to be reclassified to consolidated net income on the disposal of the related investment.

The Company reclassifies in each case proportionate to the interest disposed of the following amounts recognized in other comprehensive income: i) foreign exchange differences, ii) accumulated hedging gains and losses, iii) any other amount previously recognized that would had been recognized in net income if the associate had directly disposed of the asset to which it relates.

Upon loss of significant influence over the associate, the Company measures and recognizes any retained investment at its fair value.

A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The Company classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Company’s rights to the assets and obligations for the liabilities of the arrangements.

A 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. The Company recognizes its interest in the joint ventures as an investment and accounts for that investment using the equity method. As of December 31, 2019 and 2018 the Company does no/t have an interest in joint operations.

If an investment interest is reduced, but continues to be classified as joint arrangement, the Company reclassifies to profits or losses the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to the reduction in ownership interest if the gain or loss would be required to be reclassified to consolidated net income on the partial disposal of the related investment.

The Company reclassifies the proportion to the interest disposed of in joint ventures investment interest reduction. During the years ended December 31, 2020, 2019 and 2018 the Company did not have a significant disposal or partial disposal in joint arrangements.

Upon loss of joint control over the joint venture, the Company measures and recognizes any retained investment at its fair value.

3.15 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 accumulated impairment losses, if any. The borrowing costs related to the acquisition or construction of qualifying assets are capitalized as part of the cost of that asset, if material.

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 or, in other words, that are not yet ready for the purpose that they were bought, built or developed. The Company expects to complete those investments during the following 12 months.

Depreciation is computed using the straight-line method over the asset’s estimated useful life. Where an item of property, plant and equipment comprises major components having different useful lives, the components are accounted and depreciated for as separate items 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 assets are as follows:


		Years
Buildings		25-50
Machinery and equipment		10-20
Distribution equipment		7-15
Refrigeration equipment		5-7
Returnable bottles		1.5-3
Leasehold improvements		The shorter of lease term or 15 years
Information technology equipment		3-5
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 the consolidated income statement.

Returnable and non-returnable bottles:

Coca-Cola FEMSA has two types of bottles: returnable and non-returnable.

Non-returnable bottles are recorded in the consolidated income statement at the time of the sale of the product.

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

There are two types of returnable bottles:

Those that are in Coca-Cola FEMSA’s control within its facilities, plants and distribution centers; and

Those that have been placed in the hands of customers, and still belong to Coca-Cola FEMSA.

Returnable bottles that have been placed in the hands of customers are subject to an agreement with a retailer pursuant to which Coca-Cola FEMSA retains ownership. These bottles are monitored by sales personnel during periodic visits to retailers and Coca-Cola FEMSA 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.

Coca-Cola FEMSA’s returnable bottles are depreciated according to their estimated useful lives (three years for glass bottles and 1.5 years for PET bottles). Deposits received from customers are amortized over the same estimated useful lives of the bottles.

3.16 Leases

Under IFRS 16, the Company assesses at its inception whether a contract is, or contains, a lease when the contract conveys the right to control the use of an identified asset for a period of time in exchange for a consideration. The Company assesses whether a contract is a lease arrangement, when:

The contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all the capacity of a physically distinct asset. If the lessor has substantive substitution rights, then the asset is not identified;

The Company has the right to obtain substantially all the economic benefits from the use of the asset throughout the period of use; and

The Company has the right to direct the use of the asset when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. When the use of the asset is predetermined, the Company has the right to direct the use of the asset if either: i) it has the right to operate the asset; or ii) the design of the asset predetermines how and for what purpose it will be used.

The Company enters into leases mainly for land and buildings for its retail stores and other buildings for its offices. In general, lease agreements for retail stores last 15 years, and office space agreements last between three and five years.

As a lessee

Initial recognition

At the lease commencement date, the Company recognizes a right-of-use asset and a lease liability. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date. The right-of-use asset considers any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The lease liability is initially measured at the present value of the lease payments to be made over the lease term. The future lease payments are discounted using the Company’s incremental borrowing rate, which is considered as the rate that the Company would negotiate when financing for a similar period, and with a similar guarantee, to obtain an asset of a similar value to the lease asset. For the Company, the discount rate used to measure the right of use asset and its lease liability is the rate related to the cost of financing for the Company from the consolidated perspective (“Ultimate Parent Company”).

Lease payments included in the measurement of the lease liability, comprise the following:

Fixed payments, including in-substance fixed payments, less any incentives receivable;

Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

The exercise price under a purchase option that the Company is reasonably certain to exercise, an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early; and

Amounts expected to be payable to the lessor under residual value guarantees.

The Company does not recognize a right-of-use asset and a lease liability for short-term leases that have a lease term of 12 months or less and leases of low-value assets, mainly technological equipment used by the employees, such as: computers, handheld devices and printers. The Company recognizes the lease payments associated with these leases as an expense in the consolidated statement of income as they are incurred.

Subsequent measurement

The right-of-use asset is depreciated using the straight-line method from the commencement date to the shorter of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically adjusted for impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is measured at amortized cost using the effective interest rate method. The Company remeasures the lease liability when there is a modification in the lease term or amounts of expected payments under a residual value guarantee and when it is arising from a change in an index or rate, without modifying the incremental borrowing rate (unless it results from a change in a floating rate). The lease liability is remeasured using a new incremental borrowing rate at the date of the modification when:

An extension or termination option is exercised modifying the non-cancellable period of the contract; or

The Company changes its assessment of whether it will exercise a purchase option.

When the lease liability is remeasured, a corresponding adjustment is made to the carrying value amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

A modification to the lease agreement is accounted for as a separate lease if both of the following conditions are met: i) the modification increases the scope of the lease by adding the right-to-use one or more underlying assets; and ii) the consideration for the lease increases by an amount proportional to the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the contract.

In the consolidated statement of income, the interest expense from the lease liability is recognized as a component of finance costs, unless it is directly attributable to qualifying assets, in which case it is capitalized in accordance with the Company’s accounting policy on borrowing costs. Depreciation of the right-of-use asset is recognized in the consolidated statement of income.

Leasehold improvements on lease agreements are recognized as a part of property, plant and equipment in the consolidated financial statements and are amortized using the straight-line method over the shorter of either the useful life of the assets or the related lease term.

The Company has recognized a significant amount of right-of-use assets and a corresponding lease liability, see Note 12.

As a lessor

If the Company acts as a lessor, it determines at lease inception if each arrangement is either a finance lease or an operating lease.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the underlying asset. All other leases are classified as operating leases. The Company considers certain relevant indicators, amongst others, to determine if substantially all the risks and rewards are transferred, such as:

Whether the lease is for the major part of the economic life of the asset, or

Whether the present value of the minimum future lease payments amount to substantially all of the fair value of the underlying asset.

The Company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of the consolidated statement of income, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. The Company also recognizes costs, including depreciation of the leased assets, incurred in earning the lease revenue.

The Company initially recognizes an amount equal to the net investment of the lease, that is, the present value of future lease payments plus any guarantee of residual value that is granted; and it is classified between the current portion of the receivables with maturity less than or equal to a term of 12 months and the non-current receivables, that is, with maturity greater than 12 months; including:

(i)

fixed payments, including those that are in substance fixed payments, which may involve variability, but that are unavoidable in essence, less any lease incentive to be received;

(ii)

payments for variable rent that depend on an index or a rate at the start date of the lease contract;

(iii)

amounts payable by the lessee under residual value guarantees (if applicable);

(iv)

the price related to a purchase option if the lessee is reasonably certain to exercise the option (if applicable); and

(v)

payments for penalties derived from the termination of the lease, if the term of the lease reflects that the lessee will exercise an option to terminate the lease.

All intra-group right-of-use assets and lease liabilities, interest expenses, depreciations and cash flows relating to transactions between subsidiaries of the Company are eliminated on consolidation.

3.17 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; 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 the consolidated income statement in the period in which they are incurred.

3.18 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 at initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition (see Note 3.2). 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:

Customer relationships intangible assets acquired in a business combination, recognized on acquisition and recorded at fair value. Subsequent to initial recognition, customer relationships intangible assets are stated at cost less accumulated amortization and any impairment losses. Amortization is charged to the income statement on a straight line basis over the estimated useful economic lives which range from 10 to 20 years.

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, with a range in useful lives from 3 to 10 years. Expenditures that do not fulfill the requirements for capitalization are expensed as incurred.

Long-term alcohol licenses are amortized using the straight-line method over their estimated useful lives, which range between 12 and 15 years, and are presented as part of intangible assets with finite useful lives.

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 may exceed 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. Additionally, the Company’s intangible assets with an indefinite life also consist of FEMSA Comercio – Health Division’s trademark rights which consist of standalone beauty store retail banners, pharmaceutical distribution to third-party clients and the production of generic and bioequivalent pharmaceuticals. Finally, the Company’s intangible assets with an indefinite life consist of trademark rights related to Other Business which consists of specialized distribution platform for cleaning products and consumables.

As of December 31, 2020, and in regards to a joint restructure with TCCC for the bottling agreements, Coca-Cola FEMSA had four bottler agreements in Mexico: (i) the agreements for the Valley of Mexico territory, which are up for renewal in June 2023, (ii) the agreement for the Southeast territory, which is up for renewal in June 2023, (iii) one agreement for the Bajio territory, which is up for renewal in May 2025 and (iv) the agreement for the Golfo territory, which is up for renewal in May 2025.

As of December 31, 2020, and in regards to a joint restructure with TCCC for the bottling agreements, Coca-Cola FEMSA had two bottler agreements in Brazil which are up for renewal in October 2027; and three bottler agreements in Guatemala, which are going to be renewed in March 2025 and April 2028 under two contracts rather than the original three contracts.

In addition, Coca-Cola FEMSA had one bottler agreement in each country which are up for renewal as follows: Argentina, which is up for renewal in September 2024; Colombia which is up for renewal in June 2024; Panama which is up for renewal in November 2024; Costa Rica which is up for renewal in September 2027; Nicaragua which is up for renewal in May 2026; and Uruguay which is up for renewal in June 2028.

As of December 31, 2020, Coca-Cola FEMSA’s Venezuela investee had one bottler agreement, which is up for renewal in August 2026.

The bottler agreements are automatically renewable for ten-year terms, subject to the right of either party to give prior notice that it does not wish to renew a specific agreement. In addition, these agreements generally may be terminated in the case of material breach. Termination would prevent Coca-Cola FEMSA from selling Coca-Cola trademark beverages in the affected territory and would have an adverse effect on the Company´s business, financial conditions and results from operations.

3.19 Non-current assets held for sale and discontinued operations

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 continuous operational 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. In addition, the sale is considered highly probable if the following conditions are met:

The appropriate level of management must be committed to a plan to sell the asset (or disposal group);

An active program to locate a buyer and complete the plan must have been initiated;

The asset (disposal group) must be actively marketed for sale at a price is reasonable in relation to its current fair value; and

The sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.

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

Discontinued operations are results of operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the company’s operations and cash flows, that either has been disposed of, or is classified as held for sale, and:

Represents either a separate major line of business or geographical area of operations;

Are part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or

Is a subsidiary acquired exclusively for the purpose of reselling it.

Discontinued operations are excluded from the continuing operations and are also presented as a single line item as earnings (loss) after income taxes of discontinued operations in the income statement. For further information, please see Note 4 regarding the Company’s disposal of Philippines. In addition, the information included elsewhere in this report, includes only continuing operations unless otherwise noted.

3.20 Impairment of long-lived assets

At the end of each reporting period, the Company reviews the carrying amounts of its long-lived tangible and intangible assets with finite lives 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 CGU, or otherwise they are allocated to the smallest CGUs for which a reasonable and consistent allocation basis can be identified.

For the purpose of impairment testing goodwill acquired in a business combination, from the acquisition date, is allocated to each of the group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

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 related CGU might exceed its recoverable amount.

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, as discussed in Note 2.3.1.1.

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 the conditions leading to an impairment loss no longer exist, it is subsequently reversed, that is, 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.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized impairment losses of Ps. 5,451, Ps. 1,018 and 432, respectively (see Note 20).

3.21 Financial liabilities and equity instruments

3.21.1 Classification as debt or equity

Debt and equity instruments issued by the Company 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.

3.21.2 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.

3.21.3 Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of IFRS 9 are classified as financial liabilities at amortized cost, except for derivative instruments designated as hedging instruments in an effective hedge, financial liabilities arising from transfer of a financial asset that does not qualify for derecognition, financial guarantee contracts and contingent consideration obligations in a business combination, as appropriate, which are recognized at FVTPL. The Company determines the classification of its financial liabilities at initial recognition.

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

The Company’s financial liabilities include trade and other payables, loans and borrowings, and derivative financial instruments, see Note 3.9.

Subsequent measurement

The subsequent measurement of the Company’s financial liabilities depends on their classification as described below.

3.21.4 Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in the consolidated income statements 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 income statements, see Note 19.

3.21.5 Derecognition

A financial liability is derecognized when the obligation under the liability is discharged, 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 income statements.

3.22 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 26.

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 plan’s main features.

3.23 Post-employment and other long-term employee benefits

Post-employment and other long-term employee benefits, which are considered to be monetary items, include obligations for pension and retirement plans, seniority premiums and postretirement medical services.

In Mexico, the economic benefits from employee benefits and retirement pensions are granted to employees with 10 years of service and minimum age of 60. 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 qualifying employees, the Company also provides certain post-employment healthcare benefits such as the medical-surgical services, pharmaceuticals and hospital.

For defined benefit retirement plans and other long-term employee benefits, such as the Company’s sponsored pension and retirement plans, seniority premiums and postretirement medical service plans, 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 effects of the Company’s defined benefit obligation such as actuarial gains and losses are recognized directly in OCI. The Company presents service costs within cost of goods sold, administrative and selling expenses in the consolidated income statements. The Company presents net interest cost within interest expense in the consolidated income statements. 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, seniority premiums and postretirement medical services through irrevocable trusts of which the employees are named as beneficiaries, which serve to decrease 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.

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

When it can no longer withdraw the offer of those benefits; or

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 for 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.

3.24 Revenue recognition

The Company recognizes revenue when the control of performance obligations included in the contract are transferred to the customer. Control refers to the ability that the customer has to direct the use and also to obtain substantially all the benefits of the goods or services exchanged.

Management defined the following as indicators to analyze the timing and circumstances as well as the amount by which the revenues would be recognized:

Identify the contract(s) with a customer (written, oral or any other according with business practices);

Evaluating the goods and services committed in the contract and identify how each performance obligation in the contract will be transferred to the customer;

Considering the contractual terms jointly with business practices to determinate the transaction price. The transaction price is the amount of the consideration the Company expects to receive in exchange for transferring the committed goods and services to the customer, excluding tax on sales. The expected consideration in a contract may include fixed amounts, variable amounts or both;

Allocate the transaction price to each performance obligations in the contract (to each good and service that is different) for an amount that represents the consideration to which the entity expects to receive in exchange for the goods and services arranged with the customer; and

Recognise revenue when (or as) the entity satisfies a performance obligation in exchange for committed goods and services.

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 and discounts.

The benefits granted from suppliers to the Company as discounts and incentives are recognized as benefits in the cost of goods sold, because the Company does not have a separate performance obligation.

The Company generates revenues for the following activities:

Sale of goods

It includes the sales of goods by all the subsidiaries of the Company, mainly the sale of beverages of the leading brand of
Coca-Cola and the sale or consumption of goods in the small-format stores of the FEMSA Comercio – Proximity, FEMSA Comercio – Health and FEMSA Comercio – Fuel Divisions; in which the revenue is recognized at the point of time those products were sold to the customers. See Note 28.

Rendering of services

It includes the revenues of distribution services, maintenance services and packing of raw materials that the Company recognizes as revenues as the related performance obligation is satisfied. The Company recognizes revenues for rendering of services during the time period in which the performance obligation is satisfied when the following conditions are met:

The customer receives and consumes simultaneously the benefits, as the Company satisfies the obligation;

The customer controls the related assets, even if the Company improve them;

The revenues can be measured reliably; and

Is probable that economic benefits will flow to the Company.

Financial products

It includes interest income generated on accounts receivables recorded when the following conditions are met:

The revenues can be measured reliably; and

It is probable that economic benefits will flow to the Company.

In addition, the Company evaluates the revenue recognition based on the classification previously defined for the financial asset that generates the related financial product, according with the business models establishes for the financial instruments classified by the Company.

The main financial instruments of the Company that could generate a financial product are trade accounts receivables classified as financial assets held to maturity which are measured at amortized cost through the effective interest rate method, applying EIR, which is the rate that exactly discounts the collections of cash flows to the expected life of the related financial asset.

Rewards programs

The Company recognizes a provision for the obligation to award additional benefits to its customers. Management considers for those effects, the expectation that some percentage of its customers would not redeem their rewards points in the future based on previous experience.

Variable allowances granted to customers

The Company adjusts the transaction price based on its estimated amount of rebates and promotional allowances, among others. Those estimations include commercial commitments with customers and historical performance. The variable allowances are assigned to each related performance obligation.

Contracts costs

The incremental costs to obtain a contract with a customer are recognized as an asset (capitalized) if the Company expect to recover those costs. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. The Company recognizes those costs as an expense in the income statement when the revenue associated with those costs is recognized for a period equal to or less than a year. Any other costs that are related to the fulfillment of a contract with a customer and not within the scope of another IFRS standard (e.g. IAS 2 inventories), is recorded as an asset if they meet the following criteria:

The costs relate directly to a contract or with a contract that the Company expects to identify specifically;

The costs generate or improve the resources of the Company that will be applied to satisfy, or continue satisfying performance obligations in the future; and

The costs are expected to be recovered.

The asset recognized is amortized progressively in the same manner as the goods and services are transferred to the customer. Accordingly, the asset is recognized in the income statement through its amortization in the same period of time in which the related revenue is recognized. For the years ended December 31, 2020, 2019 and 2018, contract costs were not significant.

3.25 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 or production 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, 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, 2020, 2019 and 2018, these distribution costs amounted to Ps. 24,190, Ps. 25,068 and Ps. 23,421, respectively;

Sales: labor costs and sales commissions paid to sales personnel; and

Marketing: promotional expenses and advertising costs.

PTU is paid by the Company’s Mexican subsidiaries to eligible employees. In Mexico, employee profit sharing is computed at the rate of 10% of the individual company taxable income. PTU in Mexico is calculated from the same taxable income for income tax, except for the following: a) neither tax losses from prior years nor the PTU paid during the year are deductible; and b) payments exempt from taxes for the employees are fully deductible in the PTU computation.

3.26 Income taxes

Income tax expense represents the sum of the tax currently payable and deferred tax. Income taxes are charged to consolidated income statements 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.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.

3.26.1 Current income taxes

Income taxes are recognized in the results of the period of the year in which they are incurred, however, in the case of inflationary effects, penalties and surcharges derived from income taxes from previous years, they are recognized within the line of other expenses and other products in accordance with IAS 37 before the section of income taxes in the consolidated income statement of the Company since Management considers that the aforementioned restatements, penalties and surcharges are not an integral part of the income taxes of the year (see Note 25.2).

3.26.2 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, including tax loss carryforwards and certain tax credits, to the extent that it is probable that future taxable profits and, reversal of existing taxable temporary differences and future tax planning strategies that will create taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from initial recognition of goodwill (no recognition of deferred tax liabilities) 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. In the case of Brazil, where certain goodwill amounts are at times deductible for tax purposes, the Company recognizes in connection with the acquisition accounting a deferred tax asset for the tax effect of the excess of the tax basis over the related carrying value.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

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 long-term asset or liability, regardless of when the temporary differences are expected to reverse.

Deferred tax relating to items recognized in the other comprehensive income are recognized in correlation to the underlying transaction in OCI.

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 is 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.

In Mexico, the income tax rate is 30%, for 2020, 2019 and 2018, and it is expected to remain at 30% for the following years.

3.27 Share-based payments arrangements

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 the Company until vesting. They are accounted for as equity settled transactions. The award of equity instruments is a fixed monetary value on the grant date.

Equity-settled 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 equity-settled share-based payments is expensed and recognized based on the graded vesting method over the vesting period, based on the Company’s estimate of equity instruments that will eventually vest. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in the consolidated income statements such that the cumulative expense reflects the revised estimate.

3.28 Earnings per share

The Company presents basic and diluted earnings per share (“EPS”) data for its shares. 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. Diluted EPS is determined by adjusting the weighted average number of shares outstanding including the weighted average of own shares purchased in the year for the effects of all potentially dilutive securities, which comprise share rights granted to employees described above.

3.29 Issuance of subsidiary common shares

The Company recognizes the issuance of a subsidiary’s common shares 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 in additional paid-in capital.

Mergers, Acquisitions and Disposals

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Mergers, Acquisitions and Disposals

Note 4. Mergers, Acquisitions and Disposals

4.1 Mergers and acquisitions

The Company has consummated certain mergers and acquisitions during 2020, 2019 and 2018; which 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 income statements and the consolidated statements of financial position in the year of such acquisitions are not comparable with previous periods. The consolidated statements of cash flows for the years ended December 31, 2020, 2019 and 2018 show the cash outflow and inflow for the merged and acquired operations net of the cash acquired related to those mergers and acquisitions.

During 2020, the Company completed acquisition through the controlling interest in NW Synergy Holdings LLC of 89.5%, which amounted to Ps. 20,233 fully paid in cash. This acquisition, was primarily related to the following: on May 15, 2020, the Company completed the acquisitions of WAXIE and North American, a new platform within the Jan-San, packaging and specialized distribution industry in the United States, operating a network of 26 distribution centers across the country and serving more than 27,000 customers in various industries such as building service contractors, education, government, retail and hospitality, which is included in the Company’s results since May 2020.

The preliminary allocation on the aggregated purchase prices to the fair value of the net assets acquired is as follows:


	2020
Total current assets (including cash acquired of Ps. 138)	Ps.	2,162
Customer relationships and trademark		10,698
Other non-current assets		1,954
Total assets		14,814
Total liabilities		(3,523)
Net assets acquired		11,291
Goodwill		10,241
Non-controlling interest (1)		(1,299)
Total consideration transferred in cash		20,233
Cash acquired		138
Net cash paid	Ps.	20,095

(1)

Non-controlling interests were measured using the net asset value method.

The Company expects to recover the amounts recorded as goodwill through its strategy of creating a national distribution platform in the US, building on FEMSA’s capabilities by leveraging its expertise in the organization and management of supply chains and distribution systems in adjacent businesses. Additionally, this goodwill is deductible for US tax purposes in a period of 15 years.

The income statement information of this acquisition for the period from the acquisition date through to December 31, 2020 is as follows:


Income Statement	2020
Total revenues	Ps.	11,275
Income before income taxes		525
Net income	Ps.	498

4.1.1 Other acquisitions

During 2020, the Company completed the acquisition of 100% of Southeastern Paper Group, Inc., which amounted to Ps. 2,984 fully paid in cash. This acquisition, was primarily related to the following: on December 31, 2020, the Company completed the acquisition of SEPG, increasing its specialized distribution footprint in the United States.

The Company is in the process of finalizing the allocation of the purchase price to the fair values of the identifiable assets acquired and liabilities assumed. This process is expected to be completed for each acquisition within 12 months of the acquisition date.

The Company finalized the allocation of the purchase price to the fair values of the identifiable assets acquired and liabilities assumed for acquisitions completed during the prior year, with no significant variations to the preliminary allocation to the fair value of the net assets acquired, which were included in its audited annual consolidated financial statements as at and for the year ended December 31, 2019, primarily related to the following: (1) the acquisition of 100% of the Ecuadorian company Corporación Grupo FYBECA S.A. (“GPF”) which is included in the Company’s results since May, 2019; and (2) the acquisition of 100% of Brazilian company AGV Group (“AGV”) which is included in the Company’s results as of January, 2020.

The final allocation of the purchase prices to the fair value of the net assets acquired is as follows:


	2019
Total current assets (including cash acquired of Ps. 389)	Ps.	4,058
Total non-current assets		6,761
Total assets		10,819
Total liabilities		(8,178)
Net assets acquired		2,641
Goodwill (1)		5,219
Non-controlling interest (2)		(53)
Total consideration transferred		7,807
Amount to be paid		147
Cash acquired		389
Net cash paid		7,271

(1)

As a result of the purchase price allocation which was finalized in 2020, additional fair value adjustments from those recognized in 2019 have been recognized as follows: an increase in total net assets of Ps. 1,460 (from which Ps. 908 are customer relationships and Ps. 389 trademark rights), a decrease in goodwill of Ps. 1,323 and an additional consideration transferred during 2020 of Ps. 137.

(2)

Non-controlling interests were measured using the net asset value method.

During 2019, FEMSA Comercio has been allocated goodwill in the acquisitions in FEMSA Comercio- Health Division in Ecuador and Colombia. FEMSA Comercio expects to recover the amount recorded through synergies related to the adoption of the Company’s economic current value proposition, the ability to apply the successful operational processes and expansion planning designed for each unit.

The income statement information of these acquisitions for the period from the acquisition date through to December 31, 2019 is as follows:


Income Statement	2019
Total revenues	Ps.	8,594
Income before income taxes		37
Net loss	Ps.	1

On May 22, 2018, the Company acquired an additional 10% its participation in Café del Pacífico, S.A.P.I. de C.V. (“Caffenio”), a Mexican company founded in 1941 whose main activities includes the production of coffee and beverages formulas, commercialization of beverages and whole foods and trading of commercial contracts, for an amount of Ps. 370 and reaching a controlling interest of 50% of ownership, through an agreement with other shareholders assuming control of the subsidiary.

4.1.2 Acquisitions of Coca-Cola FEMSA

Coca-Cola FEMSA completed the following acquisitions during 2018: (1) acquisition of 100% of the Alimentos y Bebidas del Atlántico, S.A. (“ABASA”) in Guatemala, included in the Company results since May, 2018; (2) acquisition of 100% of Comercializadora y Distribuidora Los Volcanes, S.A. (“Los Volcanes”) in Guatemala included in the Company’ consolidated results beginning on May, 2018; and (3) acquisition of 100% of Montevideo Refrescos, S.R.L. (“MONRESA”) in Uruguay which is included in the consolidated financial results beginning on July 2018.

The final allocation on the purchase prices to the fair value of the net assets acquired is as follows:


	2018
Total current assets (including cash acquired of Ps. 860)	Ps.	1,864
Total non-current assets		4,031
Distribution rights		1,715
Total assets		7,610
Total liabilities		(3,961)
Net assets acquired		3,649
Goodwill(1)		2,903
Total consideration transferred		6,552
Cash acquired		(860)
Net cash paid	Ps.	5,692

(1)

As a result of the purchase price allocation which was finalized in 2019, additional fair value adjustments from those recognized in 2018 have been recognized as follows: decrease in total non-current assets amounted to Ps. 236, distribution rights of Ps. 2,887 and increase in goodwill of Ps. 2,903.

Coca-Cola FEMSA expects to recover the registered amounts recorded as goodwill through the synergies related to the available production capacity.

The income statement information of these acquisitions for the period from the acquisition date through to December 31, 2018 is as follows:


Income Statement	2018
Total revenues	Ps.	4,628
Income before income taxes		496
Net income	Ps.	413

Unaudited Pro Forma Financial Data

The following unaudited consolidated pro forma financial data represent the Company’s historical financial information, adjusted to give effect to (i) the acquisitions of Waxie and North American as if these acquisitions have occurred on January 1, 2020; and (ii) certain accounting adjustments mainly related to the pro forma depreciation of fixed assets of the acquired company.

Unaudited consolidated pro forma financial data for the acquisitions, is as follows:



	For the year ended
	December 31, 2020
Total revenues	Ps.	508,367
Income before income taxes and share of the profit of equity accounted investees		20,019
Net income		4,464
Basic net controlling interest income per share Series “B”	Ps.	(0.06)
Basic net controlling interest income per share Series “D”		(0.08)

The following unaudited consolidated pro forma financial data represent the Company’s historical financial statements, adjusted to give effect to (i) the acquisitions of GPF and AGV as if these acquisitions has occurred on January 1, 2019; and (ii) certain accounting adjustments mainly related to the pro forma depreciation of fixed assets of the acquired company.

Unaudited consolidated pro forma financial data for the acquisitions, is as follows:



	For the year ended
	December 31, 2019
Total revenues	Ps.	516,496
Income before income taxes and share of the profit of equity accounted investees		33,823
Net income		29,516
Basic net controlling interest income per share Series “B”	Ps.	1.11
Basic net controlling interest income per share Series “D”		1.38

The following unaudited consolidated pro forma financial data represent the Company’s historical financial statements, adjusted to give effect to (i) Coca-Cola FEMSA’s acquisitions and the Company’s acquisition of Caffenio as if these acquisitions have occurred on January 1, 2018; and (ii) certain accounting adjustments mainly related to the pro forma depreciation of fixed assets of the acquired company.

Unaudited consolidated pro forma financial data for the acquisitions, is as follows:



	For the year ended
	December 31, 2018
Total revenues	Ps.	473,420
Income before income taxes and share of the profit of equity accounted investees		34,266
Net income		33,521
Basic net controlling interest income per share Series “B”	Ps.	1.22
Basic net controlling interest income per share Series “D”		1.52

4.2. Disposals

4.2.1 Specialty’s

Specialty’s was a Café & Bakery business based on California, Washington and Illinois. The COVID-19 pandemic started to expand across The United States in the last weeks of March 2020, which triggered an economic crisis. In this context of uncertainty and adverse environment, the Company had financial and economic setbacks with significant impacts in sales, as well as its profitability due to the government’s contingency plans for the disease which included mobility restrictions. Therefore, on May 15, 2020, the Company announced its decision to close Specialty’s operations. Such decision was approved by the Company’s board on the date previously specified. Consequently, on May 26, 2020, the Company’s board approved the filing for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code, which was filed on May 27, 2020. As a result of filing under Chapter 7, the Company lost control over this subsidiary and consequently it was deconsolidated. The case is being handled in the California Northern Bankruptcy Court.

The effects in FEMSA’s consolidated income statement in other income and expenses due to Specialty’s closing are the following:


	2020
Impairment of long-lived assets	Ps.	2,021

4.2.2 Discontinued operations (Coca‐Cola FEMSA Philippines)

On August 16, 2018, Coca-Cola FEMSA announced its decision to exercise the put option to sell its 51% stake in CCFPI to The Coca-Cola Company. Such decision was approved by the Company’s board on August 6, 2018. Consequently beginning August 31, 2018 CCFPI had been classified as an asset held for sale and its operations as a discontinued operation in the financial statements for December 31, 2017 and 2018. Previously CCFPI represented the Asia division and was considered an independent segment until December 31, 2017. Coca-Cola FEMSA Philippines was sold on December 13, 2018.

Income statement of discontinued operations

For the year ended December 31, 2018, the income statement of discontinued operations was as follows:


	2018
Total revenues	Ps.	24,167
Cost of goods sold		17,360
Gross profit		6,807
Operating expenses		5,750
Other expenses, net		7
Financial income, net		(185)
Foreign exchange gain, net		(73)
Income before income taxes		1,308
Income taxes		466
Net income for discontinued operations	Ps.	842
Less: non-controlling interest in discontinued operations		391
Controlling interest in discontinued operations	Ps.	451
Accumulated currency translation effect for the subsidiary disposal		(811)
Gain from sale		3,335
Net income for subsidiary disposal – controlling interest		2,975
Net income from discontinued operations	Ps.	3,366

Cash and Cash Equivalents

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Cash and Cash Equivalents

Note 5. Cash and Cash Equivalents

Includes cash on hand and in bank deposits and cash equivalents, which are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value, with a maturity date of three months or less at their acquisition date. Cash and cash equivalents at the end of the reporting period as shown in the consolidated statements of financial position and cash flows is comprised of the following:


	December 31, 2020		December 31, 2019
Cash and bank balances	Ps.	43,990	Ps.	31,905
Cash equivalents (see Note 3.5)		63,634		33,657
	Ps.	107,624	Ps.	65,562

Investments

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Investments

Note 6. Investments

As of December 31, 2020 and 2019, current investments with maturity greater than three months but less than twelve months period are carried at amortized cost, and their carrying value is similar to their fair value. The following is a detail of such investments:


Fixed rate
Corporate debt securities	2020		2019
Acquisition cost	Ps.	658	Ps.	1,048
Accrued interest		4		4
Total fixed rate		662		1,052
Variable rate
Corporate debt securities
Acquisition cost		—		11,307
Accrued interest		—		7
Total variable rate		—		11,314
Total investments	Ps.	662	Ps.	12,366

Trade Accounts Receivable, Net

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Trade Accounts Receivable, Net

Note 7. Trade Accounts Receivable, Net


	December 31, 2020		December 31, 2019
Trade accounts receivable	Ps.	26,309	Ps.	26,942
The Coca-Cola Company (see Note 15)		509		802
Loans to employees		118		115
Heineken Group (see Note 15)		1,167		749
Others		2,608		3,214
Allowance for expected credit losses		(2,462)		(2,189)
	Ps.	28,249	Ps.	29,633

7.1 Trade receivables

Trade receivables representing rights arising from sales and loans to employees or any other similar concept, are presented net of discounts and the allowance for expected credit losses.

Coca-Cola FEMSA has accounts receivable from The Coca-Cola Company arising from the latter’s participation in advertising and promotional programs.

Because less than 8% of the trade accounts receivables is unrecoverable, the Company does not have customers classified as "high risk,” which would be eligible to have special management conditions for the credit risk. As of December 31, 2020, the main customers of the Company represent, in aggregate form, the expected loss on 13%.

In 2020, during the COVID-19 pandemic, governments implemented several preventive measures such as social distancing and the temporary closure of certain points of sale considered as non-essential. As such measures were relaxed, most businesses were able to reopen and this allowed us to recover the accounts receivable. Given that the impact in this item was not material, the Company did not implement any relevant change to our models to estimate the receivables’ provisions.

The allowance is calculated under an expected loss model that recognizes the impairment losses throughout the life of the contract. For this particular case, because the accounts receivable are generally outstanding for less than one year, the Company defined an impairment estimation model under a simplified approach of expected loss through a parametric model.

The parameters used within the model are:

Breach probability;

Losses severity;

Financing rate;

Special recovery rate; and

Breach exposure.

Aging of accounts receivable (days current or outstanding)



	December 31,		December 31,
	2020		2019
Current	Ps.	24,556	Ps.	24,696
0‑30 days		2,024		3,278
31‑60 days		836		1,345
61‑90 days		317		668
91‑120 days		438		244
120+ days		2,540		1,591
Total	Ps.	30,711	Ps.	31,822

7.2 Changes in the allowance for expected credit losses


	2020		2019		2018
Balance at the beginning of the period	Ps.	2,189	Ps.	2,114	Ps.	1,375
Effect of adoption of IFRS 9		—		—		468
Adjusted balance at the beginning of the period		2,189		2,114		1,843
Allowance for the period		591		709		348
Additions (write-offs) of uncollectible accounts (1)		(613)		(269)		(402)
Addition from business combinations		273		—		1
Effects of changes in foreign exchange rates		22		(365)		324
Balance at the end of the period	Ps.	2,462	Ps.	2,189	Ps.	2,114

(1)

In 2018, includes the effect of Coca‐Cola FEMSA Philippines, Inc. sale for an aggregate amount of $ 82.

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 disperse.

7.3 Payments from The Coca-Cola Company

The Coca-Cola Company participates in certain advertising and promotional programs as well as in the Coca-Cola FEMSA’s refrigeration equipment and returnable bottles investment program. Contributions received by Coca-Cola FEMSA 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 carrying amount of refrigeration equipment and returnable bottles items. For the years ended December 31, 2020, 2019 and 2018 contributions due were Ps. 1,482, Ps. 2,274 and Ps. 3,542, respectively.

Inventories

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Inventories

Note 8. Inventories


	December 31,		December 31,
	2020		2019
Finished products	Ps.	36,603	Ps.	32,853
Raw materials		4,756		5,331
Spare parts		1,118		1,198
Work in process		114		113
Inventories in transit		1,443		1,528
	Ps.	44,034	Ps.	41,023

For the years ended 2020, 2019 and 2018, the Company recognized write-downs of its inventories for Ps. 2,046, Ps. 2,992 and Ps. 2,006 to net realizable value, respectively.

For the years ended 2020, 2019 and 2018, changes in inventories are comprised of the following and included in the consolidated income statement under the cost of goods sold caption:


	2020		2019		2018
Changes in inventories of finished goods and work in progress	Ps.	209,410	Ps.	221,540	Ps.	204,688
Raw materials and consumables used		79,896		84,502		79,825
Total	Ps.	289,306	Ps.	306,042	Ps.	284,513

Other Current Assets and Other Current Financial Assets

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Other Current Assets and Other Current Financial Assets

Note 9. Other Current Assets and Other Current Financial Assets

9.1 Other current assets


	December 31,		December 31,
	2020		2019
Prepaid expenses	Ps.	2,424	Ps.	2,201
Recoverable taxes		5		268
Agreements with customers		115		294
Licenses		261		575
Assets classified as held for sale		30		197
Other		84		553
	Ps.	2,919	Ps.	4,088

As of December 31, 2020 and 2019, Company’s prepaid expenses are as follows:


	December 31,		December 31,
	2020		2019
Advances for inventories	Ps.	1,651	Ps.	1,359
Advertising and promotional expenses paid in advance		93		89
Advances to service suppliers		30		60
Prepaid leases		93		239
Prepaid insurance		181		129
Others		376		325
	Ps.	2,424	Ps.	2,201

For the years ended December 31, 2020, 2019 and 2018, Company’s advertising and promotional expenses amounted to Ps. 7,471, Ps. 8,840 and Ps. 7,695, respectively.

9.2 Other current financial assets


	December 31,		December 31,
	2020		2019
Restricted cash	Ps.	77	Ps.	92
Derivative financial instruments (see Note 21)		573		1,008
Note receivables (1)		31		46
	Ps.	681	Ps.	1,146

(1)

The carrying value approximates its fair value as of December 31, 2020 and 2019.

The Company has pledged part of its cash in order to fulfill the collateral requirements for the accounts payable in different currencies. As of December 31, 2020 and 2019, the restricted cash pledged was held in:

The restricted cash in U.S. Dollars corresponds to operations in Brazil and consists of current deposits as requirements to guarantee the notes payable.

Equity Accounted Investees

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Equity Accounted Investees

Note 10. Equity Accounted Investees

As of December 31, 2020 and 2019, Company’s equity accounted investees are as follows:


			Ownership Percentage					Carrying Value
	Principal		December 31,		December 31,			December 31,		December 31,
Investee	Activity	Place of Incorporation	2020		2019			2020		2019
Heineken (1) (2)	Beverages	The Netherlands	14.8	%	14.8	%	Ps.	87,291	Ps.	83,789
Coca-Cola FEMSA:
Joint ventures:
Compañía Panameña de Bebidas, S.A.P.I. de C.V.	Beverages	Mexico	-	%	50.0	%		—		486
Dispensadoras de Café, S.A.P.I. de C.V.	Services	Mexico	50.0	%	50.0	%		181		172
Fountain Agua Mineral, L.T.D.A.	Beverages	Brazil	50.0	%	50.0	%		720		851
Associates:
Promotora Industrial Azucarera, S.A.	Sugar production		36.4	%	36.4	%		3,335		3,274
de C.V. (“PIASA”)		Mexico
Industria Envasadora de Querétaro, S.A.	Canned bottling	Mexico	26.5	%	26.5	%		192		194
de C.V. (“IEQSA”)
Industria Mexicana de Reciclaje, S.A. de C.V. (“IMER”)	Recycling	Mexico	35.0	%	35.0	%		121		121
Jugos del Valle, S.A.P.I. de C.V.	Beverages	Mexico	28.8	%	28.8	%		1,945		1,929
Leao Alimentos e Bebidas, L.T.D.A.	Beverages	Brazil	24.7	%	24.7	%		446		1,931
Other investments in Coca-Cola FEMSA’s companies	Various	Various	Various		Various			683		793
FEMSA Comercio:
Raizen Conveniências (4)	Proximity	Brazil	50.0	%	—			2,763		3,410
Other investments (1) (3)	Various	Various	Various		Various			593		520
							Ps.	98,270	Ps.	97,470

(1)

Associate.

(2)

As of December 31, 2020 and 2019 comprised of 8.63% of Heineken, N.V. and 12.26% of Heineken Holding, N.V., which represents an economic interest of 14.76% in Heineken Group. The Company has significant influence, mainly, due to the fact that it participates in the Board of Directors of Heineken Holding, N.V. and the Supervisory Board of Heineken N.V.; and for the material transactions between the Company and Heineken Group.

(3)

Joint ventures.

(4)

On November 1, 2019, FEMSA Comercio – Proximity Division closed the acquisition of a 50% interest of Raízen Conveniências. The consideration amounted to R$ 357 million paid in cash and R$367 through notes payable, and such amounts include FEMSA Comercio’s prorrata portion of the investment requirements for the initial period of operations of the joint venture. Raízen is a company formed in 2010 from Cosan and Royal Dutch Shell in Brazil. The Joint Venture between FEMSA Comercio – Proximity Division and Raízen is limited to the convenience and proximity store business and excludes any other Raízen operations.

During 2020 Coca-Cola FEMSA made capital contributions to Jugos del Valle, S.A.P.I. de C.V. and to Compañía Panameña de Bebidas, S.A.P.I de C.V. for the amounts of Ps. 23 and Ps. 1,302, respectively. There were no changes in the ownership percentage as a result of capital contributions made by the other shareholders. During 2019 Coca-Cola FEMSA made capital contributions to Jugos del Valle, S.A.P.I. de C.V. and Promotora Industrial Azucarera, S.A. de C.V. in the amounts of Ps. 204 and Ps. 111, respectively, and there were no changes in the ownership percentage as a result of capital contributions made by the other shareholders.

During 2020 the Company recognized impairments on its investment in Compañía Panameña de Bebidas, S.A.P.I. de C.V. and Leao Alimentos y Bebidas LTDA. for the amounts of Ps. 1,463 and Ps. 1,038, respectively. During 2019 the Company recognized an impairment on its investment in Compañía Panameña de Bebidas, S.A.P.I. de C.V. for the amount of Ps. 948, which was included in the other expenses line.

On September 30, 2020, Coca-Cola FEMSA that its joint venture with The Coca-Cola Company (Compañía Panameña de Bebidas, S.A..P.I. de C.V.) successfully sold 100% of its stock interest in Estrella Azul, a dairy products company in Panama. As part of the transaction, Coca-Cola FEMSA agreed with the buyer to receive payments in the future if the business of Estrella Azul achieves certain volume and EBITDA targets during the 2022-2027 period. Coca-Cola FEMSA estimated the amount of the payments to be received based on the forecasts of the business and calculated their net present value. As of December 31, 2020, the financial asset recognized in the consolidated statement of financial position has a total value of Ps. 8. This transaction is presented in the other expenses line of the consolidated financial statements as Coca-Cola FEMSA concluded did not achieve the requirements to be considered as a discontinued operation under IFRS 5.

During 2020, Coca-Cola FEMSA received dividends from Industria Envasadora de Querétaro, S.A. de C.V. for the amount of Ps. 16 and during 2019, Coca-Cola FEMSA received dividends from Promotora Mexicana de Embotelladores, S.A. de C.V. for the amount of Ps. 1.

On April 30, 2010, the Company acquired an economic interest of 20% of Heineken Group. Heineken’s main activities are the production, distribution and marketing of beer worldwide. On September 18, 2017, the Company concluded the sale of a portion of its investment, representing 5.2% combined economic interest, consisting of 22,485,000 Heineken N.V. shares and 7,700,000 Heineken Holding N.V. shares at the price of €. 84.50 and €. 78.00 per share, respectively. The Company recognized an equity (loss) income of Ps. (434), Ps. 6,428 and Ps. 6,478 net of taxes based on its economic interest in Heineken Group for the years ended December 31, 2020, 2019 and 2018, respectively. The economic interest as of December 31, 2020 and 2019 was 14.8%. The Company’s share of the net (loss) income attributable to equity holders of Heineken Group exclusive of amortization of adjustments amounted to Ps. (842) (€. (30) million), Ps. 6,885 (€.319 million) and Ps. 6,320 (€.281 million), for the years ended December 31, 2020, 2019 and 2018, respectively. Summarized financial information in respect of the associate Heineken Group accounted for under the equity method is set out below.


	December 31, 2020				December 31, 2019
Amounts in millions	Peso		Euro		Peso		Euro
Total current assets	Ps.	221,182	€.	9,020	Ps.	177,829	€.	8,419
Total non-current assets		824,210		33,612		804,443		38,085
Total current liabilities		266,497		10,868		259,952		12,307
Total non-current liabilities		425,984		17,372		356,671		16,886
Total equity		352,911		14,392		365,648		17,311
Equity attributable to equity holders (1)		328,393		13,392		341,062		16,147
Total revenue and other income	Ps.	479,996	€.	19,771	Ps.	511,125	€.	24,064
Total cost and expenses		461,108		18,993		433,959		20,431
Net (loss) income	Ps.	(2,136)	€.	(88)	Ps.	50,424	€.	2,374
Net (loss) income attributable to equity holders		(4,953)		(204)		46,006		2,166
Other comprehensive (loss) income		(48,944)		(2,016)		3,951		186
Total comprehensive (loss) income	Ps.	(51,080)	€.	(2,104)	Ps.	54,375	€.	2,560
Total comprehensive (loss) income attributable to equity holders		(51,639)		(2,127)		49,447		2,328

(1)

Following the IFRS Interpretations Committee agenda decision in January 2019 regarding tax deposits (relating to taxes other than income tax), Heineken Group changed its accounting policy with regards to payments relating to contingent liabilities.

Reconciliation from the equity of the associate Heineken Group to the investment of the Company.


	December 31, 2020						December 31, 2019
Amounts in millions	Peso			Euro			Peso			Euro
Equity attributable to equity holders of Heineken (1)	Ps.	328,393		€.	13,392		Ps.	341,062		€.	16,147
Economic ownership percentage		14.76	%		14.76	%		14.76	%		14.76	%
Investment in Heineken investment exclusive of goodwill and other adjustments	Ps.	48,471		€.	1,977		Ps.	50,341		€.	2,383
Effects of fair value determined by purchase price allocation		17,226			702			14,839			703
Goodwill		21,594			881			18,609			881
Heineken investment	Ps.	87,291		€.	3,560		Ps.	83,789		€.	3,967

(1)

Related to the change in Heineken’s accounting policy mentioned in the table above, the Company recognized the accumulated effects as of January 1, 2019.

As of December 31, 2020 and 2019, the fair value of the Company’s investment in Heineken N.V. Holding and Heineken N.V. represented by shares equivalent to 14.8% of its outstanding shares amounted to Ps. 176,718 (€.7,255 million) and Ps. 164,504 (€.7,769 million) based on quoted market prices of those dates. As of April 9, 2021, fair value amounted to €. 7,347 million.

During the years ended December 31, 2020, 2019 and 2018, the Company received dividends distributions from Heineken Group, amounting to Ps. 2,322, Ps. 3,031 and Ps. 2,872, respectively.

For the years ended December 31, 2020, 2019 and 2018 the equity (loss) earnings recognized for associates of Coca-Cola FEMSA was Ps. (124), Ps. 84 and Ps. 44, respectively.

For the years ended December 31, 2020, 2019 and 2018 the equity (loss) earnings recognized for joint ventures of Coca-Cola FEMSA was Ps. (157), Ps. (215) and Ps. (270), respectively.

For the year ended December 31, 2020, 2019 and 2018, the Company’s share of other comprehensive income from equity investees, net of taxes are as follows:


	2020		2019		2018
Items that may be reclassified to consolidated net income:
Valuation of the effective portion of derivative financial instruments	Ps.	(14)	Ps.	—	Ps.	(355)
Exchange differences on translating foreign operations		(5,934)		1,058		(5)
Total	Ps.	(5,948)	Ps.	1,058	Ps.	(360)
Items that may not be reclassified to consolidated net income in
subsequent periods:
Remeasurements of the net defined benefit liability	Ps.	(111)	Ps.	(389)	Ps.	597

Property, Plant and Equipment, Net

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Property, Plant and Equipment, Net

Note 11. Property, Plant and Equipment, Net


											Investments
					Machinery						in Fixed
					and		Refrigeration		Returnable		Assets in		Leasehold
Cost	Land		Buildings		Equipment		Equipment		Bottles		Progress		Improvements		Other		Total
Cost as of January 1,2018	Ps.	13,589	Ps.	25,972	Ps.	80,302	Ps.	17,465	Ps.	21,532	Ps.	7,390	Ps.	19,666	Ps.	1,028	Ps.	186,944
Additions		334		877		6,926		644		2,888		6,482		3,322		111		21,584
Additions from business acquisitions		25		451		4,128		537		393		290		2		41		5,867
Transfer of completed projects in progress		526		567		2,193		1,711		3		(4,927)		(93)		20		—
Transfer (to)/from assets classified as held for sale		—		—		(127)		—		—		—		—		—		(127)
Disposals		(93)		(152)		(4,623)		(614)		(312)		(633)		(748)		(21)		(7,196)
Philippines disposal		(4,654)		(2,371)		(11,621)		(2,415)		(10,116)		(489)		(236)		—		(31,902)
Effects of changes in foreign exchange rates		(401)		(1,079)		(3,526)		(759)		(251)		(330)		(354)		(293)		(6,993)
Changes in value on the recognition of inflation effects		242		816		2,552		465		612		66		—		9		4,762
Cost as of December 31, 2018	Ps.	9,568	Ps.	25,081	Ps.	76,204	Ps.	17,034	Ps.	14,749	Ps.	7,849	Ps.	21,559	Ps.	895	Ps.	172,939


											Investments
					Machinery						in Fixed
					and		Refrigeration		Returnable		Assets in		Leasehold
Cost	Land		Buildings		Equipment		Equipment		Bottles		Progress		Improvements		Other		Total
Cost as of January 1,2019	Ps.	9,568	Ps.	25,081	Ps.	76,204	Ps.	17,034	Ps.	14,749	Ps.	7,849	Ps.	21,559	Ps.	895	Ps.	172,939
Additions		309		1,134		6,826		636		2,581		8,421		2,907		112		22,926
Additions from business acquisitions		146		806		686		—		—		—		466		—		2,104
Changes in the fair value of past acquisitions		142		227		50		(13)		—		—		7		(8)		405
Transfer of completed projects in progress		(253)		581		3,694		1,396		359		(6,284)		496		11		—
Transfer (to)/from assets classified as held for sale		—		—		(410)		—		—		—		—		(49)		(459)
Disposals		(15)		(254)		(3,195)		(1,032)		(1,056)		(33)		(170)		(38)		(5,793)
Effects of changes in foreign exchange rates		(329)		(1,147)		(2,463)		(961)		(833)		(370)		26		(130)		(6,207)
Effects on the recognition of inflation effects		114		366		1,254		241		352		18		—		—		2,345
Cost as of December 31, 2019	Ps.	9,682	Ps.	26,794	Ps.	82,646	Ps.	17,301	Ps.	16,152	Ps.	9,601	Ps.	25,291	Ps.	793	Ps.	188,260


											Investments
					Machinery						in Fixed
					and		Refrigeration		Returnable		Assets in		Leasehold
Cost	Land		Buildings		Equipment		Equipment		Bottles		Progress		Improvements		Other		Total
Cost as of January 1,2020	Ps.	9,682	Ps.	26,794	Ps.	82,646	Ps.	17,301	Ps.	16,152	Ps.	9,601	Ps.	25,291	Ps.	793	Ps.	188,260
Additions		241		616		5,277		137		2,613		6,979		2,611		185		18,659
Additions from business acquisitions		158		—		200		—		—		3		46		81		488
Changes in the fair value of past acquisitions		—		—		59		—		—		—		—		—		59
Transfer of completed projects in progress		4		809		3,471		1,192		57		(5,644)		110		1		—
Transfer (to)/from assets classified as held for sale		—		—		449		—		—		—		—		—		449
Disposals		(13)		(122)		(3,358)		(1,073)		(561)		(12)		(808)		(58)		(6,005)
Specialty's disposal		—		—		(775)		—		—		(24)		(1,036)		—		(1,835)
Effects of changes in foreign exchange rates		(238)		(1,135)		(2,233)		(797)		(629)		(339)		310		(97)		(5,158)
Effects on the recognition of inflation effects		88		293		990		189		291		(30)		3		—		1,824
Cost as of December 31, 2020	Ps.	9,922	Ps.	27,255	Ps.	86,726	Ps.	16,949	Ps.	17,923	Ps.	10,534	Ps.	26,527	Ps.	905	Ps.	196,741


											Investments
					Machinery						in Fixed
					and		Refrigeration		Returnable		Assets in		Leasehold
Accumulated Depreciation	Land		Buildings		Equipment		Equipment		Bottles		Progress		Improvements		Other		Total
Accumulated Depreciation as of January 1,2018	Ps.	—	Ps.	(6,051)	Ps.	(34,308)	Ps.	(8,996)	Ps.	(13,423)	Ps.	—	Ps.	(6,956)	Ps.	(498)	Ps.	(70,232)
Depreciation for the year		—		(786)		(7,437)		(1,752)		(2,827)		—		(1,763)		(133)		(14,698)
Transfer to/(from) assets classified as held for sale		—		—		78		—		—		—		—		—		78
Disposals		—		69		4,970		579		204		—		571		—		6,393
Philippines disposal		—		700		6,125		2,083		7,225		—		77		—		16,210
Effects of changes in foreign exchange rates		—		112		404		250		631		—		141		143		1,681
Changes in value on the recognition of inflation effects		—		(223)		(2,692)		(338)		(516)		—		—		—		(3,769)
																		—
Accumulated Depreciation as of December 31, 2018	Ps.	—	Ps.	(6,179)	Ps.	(32,860)	Ps.	(8,174)	Ps.	(8,706)	Ps.	—	Ps.	(7,930)	Ps.	(488)	Ps.	(64,337)


											Investments
					Machinery						in Fixed
					and		Refrigeration				Assets in		Leasehold
Accumulated Depreciation	Land		Buildings		Equipment		Equipment		Returnable Bottles		Progress		Improvements		Other		Total
Accumulated Depreciation as of January 1,2019	Ps.	—	Ps.	(6,179)	Ps.	(32,860)	Ps.	(8,174)	Ps.	(8,706)	Ps.	—	Ps.	(7,930)	Ps.	(488)	Ps.	(64,337)
Depreciation for the year		—		(937)		(7,862)		(1,862)		(2,734)		—		(1,985)		(88)		(15,468)
Transfer to/(from) assets classified as held for sale		—		—		262		—		—		—		—		—		262
Disposals		—		46		1,967		966		1,079		—		115		31		4,204
Effects of changes in foreign exchange rates		—		264		1,249		583		572		—		64		63		2,795
Changes in value on the recognition of inflation effects		—		(92)		(629)		(164)		(302)		—		(2)		(14)		(1,203)
																		—
Accumulated Depreciation as of December 31, 2019	Ps.	—	Ps.	(6,898)	Ps.	(37,873)	Ps.	(8,651)	Ps.	(10,091)	Ps.	—	Ps.	(9,738)	Ps.	(496)	Ps.	(73,747)


											Investments
					Machinery						in Fixed
					and		Refrigeration		Returnable		Assets in		Leasehold
Accumulated Depreciation	Land		Buildings		Equipment		Equipment		Bottles		Progress		Improvements		Other		Total
Accumulated Depreciation as of January 1,2020	Ps.	—	Ps.	(6,898)	Ps.	(37,873)	Ps.	(8,651)	Ps.	(10,091)	Ps.	—	Ps.	(9,738)	Ps.	(496)	Ps.	(73,747)
Depreciation for the year		—		(828)		(8,390)		(1,832)		(2,779)		—		(2,404)		(145)		(16,378)
Transfer to/(from) assets classified as held for sale		—		—		(282)		—		—		—		0		—		(282)
Disposals		—		38		2,707		989		536		—		492		38		4,800
Specialty's disposal		—		—		625		—		—		—		649		—		1,274
Effects of changes in foreign exchange rates		—		127		698		464		432		—		(123)		170		1,768
Changes in value on the recognition of inflation effects		—		(82)		(595)		(132)		(250)		—		(6)		(5)		(1,070)
Accumulated Depreciation as of December 31, 2020	Ps.	—	Ps.	(7,643)	Ps.	(43,110)	Ps.	(9,162)	Ps.	(12,152)	Ps.	—	Ps.	(11,130)	Ps.	(438)	Ps.	(83,635)

Investments

Machinery

in Fixed

and

Refrigeration

Returnable

Assets in

Leasehold

Carrying Amount

Land

Buildings

Equipment

Bottles

Progress

Improvements

Other

Total

As of December 31, 2018

Ps.

9,568

Ps.

18,902

Ps.

43,344

Ps.

8,860

Ps.

6,043

Ps.

7,849

Ps.

13,629

Ps.

407

Ps.

108,602

As of December 31, 2019

Ps.

9,682

Ps.

19,896

Ps.

44,773

Ps.

8,650

Ps.

6,061

Ps.

9,601

Ps.

15,553

Ps.

297

Ps.

114,513

As of December 31, 2020

Ps.

9,922

Ps.

19,612

Ps.

43,616

Ps.

7,787

Ps.

5,771

Ps.

10,534

Ps.

15,397

Ps.

467

Ps.

113,106

For the years ended December 31, 2020, 2019 and 2018, the Company did not recognize any capitalization of borrowing costs.

Leases

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Leases

Note 12. Leases

During 2020, the activity in the consolidated right-of-use assets reported in our financial statements was as follows:


	Land and
	buildings		Other (1)	Total
Cost as of January 1,2020	Ps.	51,926	758	52,684
Additions		6,478	1,504	7,982
Additions from business combinations		1,414	351	1,765
Disposals (2)		(2,190)	(114)	(2,304)
Remeasurements		3,749	84	3,833
Depreciation		(8,138)	(491)	(8,629)
Effects of changes in foreign exchange rates and restatement effects associated with hyperinflationary economies		(475)	(109)	(584)
Right-of-use assets, net as of December 31, 2020	Ps.	52,764	1,983	54,747

(1)

Other assets mainly include transportation equipment and servers.

(2)

Includes Specialty’s disposal for an amount of Ps. 690.

As of December 31, 2020, the lease liabilities are integrated as follows:


	December 31, 2020
Maturity analysis – contractual undiscounted cash flows
Less than one Year	Ps.	11,511
One to five years		36,172
Five to ten years		27,088
More than ten years		13,823
Total undiscounted lease liabilities at December 31		88,594
Lease liabilities included in the statement of financial position at December 31		58,308
Current		6,772
Non-Current	Ps.	51,536

As December 31, 2020, the weighted average incremental borrowing rate was 9.49%.

The interest expense for leases reported in the income statement for the year ended December 31, 2020 was Ps. 5,075.

The expense relating to short-term leases and leases of low-value assets for the year ended December 31, 2020 was Ps. 508.

For the year ended December 31, 2020, the amounts recognized in the consolidated statement of cash flows related to leases is Ps. 9,810.

As of December 31, 2020, the accumulated amount of concessions, decreases or cancellations for rent, which arose as a direct consequence of COVID-19 were not material. The Company applied the practical expedient to all decreases that met the criteria of the amendment to IFRS 16 effective as of June 1, 2020.

During 2019, the activity in the consolidated right-of-use assets reported in our financial statements was as follows:


	Land and
	buildings		Other (1)	Total
Cost as of January 1,2019	Ps.	49,112	1,108	50,220
Additions		7,406	96	7,502
Additions from business combinations		2,187	—	2,187
Disposals		(827)	(5)	(832)
Remeasurements		2,299	(9)	2,290
Depreciation		(7,492)	(401)	(7,893)
Effects of changes in foreign exchange rates and restatement effects associated with hyperinflationary economies		(759)	(31)	(790)
Right-of-use assets, net as of December 31, 2019	Ps.	51,926	758	52,684

(1)

Other assets mainly include transportation equipment and servers.

As of December 31, 2019, the lease liabilities are integrated as follows:


	December 31, 2019
Maturity analysis – contractual undiscounted cash flows
Less than one year	Ps.	10,655
One to five years		40,262
Five to ten years		24,053
More than ten years		11,884
Total undiscounted lease liabilities at December 31		86,854
Lease liabilities included in the statement of financial position at December 31		54,679
Current		7,387
Non-Current	Ps.	47,292

As December 31, 2019, the weighted average incremental borrowing rate was 10.18%.

The interest expense for leases reported in the income statement for the year ended December 31, 2019 was Ps. 4,774.

The expense relating to short-term leases and leases of low-value assets for the year ended December 31, 2019 was Ps. 430.

For the year ended December 31, 2019, the amounts recognized in the consolidated statement of cash flows related to leases is Ps. 8,848.

12.1 Land and buildings leases

The Company leases land for constructions of its retail stores mainly and some buildings for its office space. The leases of retail stores typically run for an average useful life of 15 years, and leases of office space for three to five years. Some leases include an option to renew the lease for additional period at the end of the contract term.

Some leases provide for additional rent payments that are based on changes in the National Consumer and Price Index, or sales that the Company makes at the leased store in the period.

Variable lease payments based on sales

Some leases of retail stores contain variable lease payments that are based on sales that the Company makes at the store. Variable rental payments were not significant for the year ended December 31, 2020.

The Company expects the relative proportions of fixed and variable lease payments to remain broadly consistent in future years.

Extension options

Some leases of office buildings, cellars and retail stores contain extension options exercisable by the Company up to one year before the end of the non-cancellable contract period. Where practicable, the Company seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by FEMSA and not by the lessor, in other words, the lessee has the unilateral right to exercise the extension option. The Company assesses at lease commencement whether it is reasonably certain to exercise the extension options. FEMSA reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant change in circumstances within its control. Except for some business units, FEMSA consider that the “reasonably certain” criteria is met when a new lease contract is signed by both, the Company and the lessor, which usually occurs within a short period of the expiration of the current lease term. Extension options on leases do not represent a significant impact on the right-of-use assets at December 31, 2020.

12.2 Other leases

The Company leases vehicles, servers and equipment, with lease terms from three to five years. In some cases, the Company has options to purchase the assets at the end of the contract term. At the commencement date, the Company does not expect to exercise the purchase option.

FEMSA also leases IT equipment and machinery with contract terms from one to three years. These leases are short-term and/or leases of low-value items. The Company has elected not to recognize right-of-use assets and lease liabilities for these types of leases.

Intangible Assets

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Intangible Assets

Note 13. Intangible Assets


	Rights to Produce
	and Distribute						Other Indefinite		Total		Technology								Total
	Coca-Cola						Lived		Unamortized		Costs and		Systems in						Amortized		Total
	Trademark Products		Goodwill		Trademark Rights		Intangible Assets		Intangible Assets		Management Systems		Development		Alcohol Licenses		Other		Intangible Assets		Intangible Assets
Cost as of January 1,2018	Ps.	91,902	Ps.	43,449	Ps.	7,185	Ps.	2,257	Ps.	144,793	Ps.	7,103	Ps.	1,291	Ps.	1,637	Ps.	3,843	Ps.	13,874	Ps.	158,667
Additions		—		75		—		71		146		1,051		371		131		94		1,647		1,793
Acquisitions from business combinations (see Note 4)		4,602		842		170		—		5,614		35		57		—		291		383		5,997
Changes in fair value of past acquisitions		—		272		—		—		272		—		—		—		—		—		272
Internal development		—		—		—		—		—		—		—		—		41		41		41
Transfer of completed development systems		—		—		—		—		—		904		(904)		—		—		—		—
Disposals		—		—		—		(2)		(2)		(43)		—		—		(146)		(189)		(191)
Philippines disposal		(3,882)		—		—		—		(3,882)		—		—		—		(596)		(596)		(4,478)
Effect of movements in										—										—		—
exchange rates		(5,005)		(4,108)		(656)		(349)		(10,118)		(343)		(38)		—		(311)		(692)		(10,810)
Changes in value on the recognition of inflation effects		—		—		—		—		—		—		—		—		57		57		57
Cost as of December 31, 2018	Ps.	87,617	Ps.	40,530	Ps.	6,699	Ps.	1,977	Ps.	136,823	Ps.	8,707	Ps.	777	Ps.	1,768	Ps.	3,273	Ps.	14,525	Ps.	151,348


	Rights to Produce
	and Distribute						Other		Total		Technology								Total		Total
	Coca-Cola						Indefinite Lived		Unamortized		Costs and		Systems in						Amortized		Intangible
	Trademark Products		Goodwill		Trademark Rights		Intangible Assets		Intangible Assets		Management Systems		Development		Alcohol Licenses		Other		Intangible Assets		Assets
Cost as of January 1,2019	Ps.	87,617	Ps.	40,530	Ps.	6,699	Ps.	1,977	Ps.	136,823	Ps.	8,707	Ps.	777	Ps.	1,768	Ps.	3,273	Ps.	14,525	Ps.	151,348
Additions		—		—		—		164		164		824		334		191		685		2,034		2,198
Acquisitions from business combinations (see Note 4)		—		6,542		469		—		7,011		759		—		—		12		771		7,782
Changes in fair value of past acquisitions		(2,887)		2,903		—		153		169		(6)		—		—		(185)		(191)		(22)
Transfer of completed development systems		—		—		—		—		—		412		(413)		—		1		—		—
Disposals		—		—		(48)		—		(48)		(580)		—		(130)		—		(710)		(758)
Effect of movements in exchange rates		(3,475)		(2,069)		(520)		(134)		(6,198)		(553)		(23)		—		(337)		(913)		(7,111)
Changes in value on the recognition of inflation effects		—		—		—		—		—		—		—		—		(6)		(6)		(6)
Cost as of December 31, 2019	Ps.	81,255	Ps.	47,906	Ps.	6,600	Ps.	2,160	Ps.	137,921	Ps.	9,563	Ps.	675	Ps.	1,829	Ps.	3,443	Ps.	15,510	Ps.	153,431


	Rights to Produce
	and Distribute						Other Indefinite		Total		Technology								Total		Total
	Coca-Cola				Trademark		Lived		Unamortized		Costs and		Systems in		Alcohol				Amortized		Intangible
	Trademark Products		Goodwill		Rights		Intangible Assets		Intangible Assets		Management Systems		Development		Licenses		Other (1)		Intangible Assets		Assets
Cost as of January 1,2020	Ps.	81,255		47,906	Ps.	6,600	Ps.	2,160	Ps.	137,921	Ps.	9,563	Ps.	675	Ps.	1,829	Ps.	3,443	Ps.	15,510	Ps.	153,431
Additions		1		—		—		—		1		771		202		111		398		1,482		1,483
Acquisitions from business combinations (see Note 4)		—		12,080		2,101		—		14,181		26		—		—		8,597		8,623		22,804
Changes in the fair value of past acquisitions		—		(1,323)		347		(361)		(1,337)		—		—		—		1,268		1,268		(69)
Transfer of completed development systems		—		—		—		—		—		397		(399)		—		2		—		—
Disposals		—		(183)		(116)		(305)		(604)		(164)		(6)		(43)		(373)		(586)		(1,190)
Specialty's disposal		—		(1,194)		(215)		(11)		(1,420)		—		—		—		(5)		(5)		(1,426)
Effect of movements in exchange rates		(4,607)		(4,466)		(70)		(59)		(9,202)		276		(40)		—		(1,614)		(1,378)		(10,580)
Changes in value on the recognition of inflation effects		—		—		—		—		—		—		—		—		38		38		38
Cost as of December 31, 2020	Ps.	76,649	Ps.	52,820	Ps.	8,647	Ps.	1,424	Ps.	139,540	Ps.	10,869	Ps.	432	Ps.	1,897	Ps.	11,754	Ps.	24,952	Ps.	164,492

(1)

Includes customer relationships related to the acquisition through the controlling interest in NW Synergy Holdings LLC disclosed in Note 4.


	Rights to Produce
	and Distribute						Other Indefinite		Total		Technology								Total		Total
	Coca-Cola						Lived		Unamortized		Costs and		Systems in						Amortized		Intangible
Amortization and Impairment Losses	Trademark Products		Goodwill		Trademark Rights		Intangible Assets		Intangible Assets		Management Systems		Development		Alcohol Licenses		Other		Intangible Assets		Assets
Amortization as of January 1,2018	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	(3,262)	Ps.	—	Ps.	(457)	Ps.	(855)	Ps.	(4,574)	Ps.	(4,574)
Amortization expense		—		—		—		—		—		(1,453)		—		(87)		(373)		(1,913)		(1,913)
Disposals		—		—		—		—		—		93		—		—		98		191		191
Philippines disposal		—		—		—		—		—		—		—		—		375		375		375
Effect of movements in exchange rates		—		—		—		—		—		236		—		—		(1)		235		235
Changes in value on the recognition of inflation effects		—		—		—		—		—		(51)		—		—		(1)		(52)		(52)
Amortization as of December 31, 2018	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	(4,437)	Ps.	—	Ps.	(544)	Ps.	(757)	Ps.	(5,738)	Ps.	(5,738)
Amortization as of January 1,2019	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	(4,437)	Ps.	—	Ps.	(544)	Ps.	(757)	Ps.	(5,738)	Ps.	(5,738)
Amortization expense		—		—		—		—		—		(1,351)		—		(123)		(337)		(1,811)		(1,811)
Disposals		—		—		—		—		—		445		—		30		—		475		475
Philippines disposal
Effect of movements in exchange rates		—		—		—		—		—		165		—		—		68		233		233
Changes in value on the recognition of inflation effects		—		—		—		—		—		(29)		—		—		1		(28)		(28)
Amortization as of December 31, 2019	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	(5,207)	Ps.	—	Ps.	(637)	Ps.	(1,025)	Ps.	(6,869)	Ps.	(6,869)
Amortization as of January 1,2020	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	(5,207)	Ps.	—	Ps.	(637)	Ps.	(1,025)	Ps.	(6,869)	Ps.	(6,869)
Amortization expense		—		—		—		—		—		(1,536)		—		(97)		(832)		(2,465)		(2,465)
Disposals		—		—		—		—		—		129		—		—		50		179		179
Effect of movements in exchange rates		—		—		—		—		—		142		—		—		51		193		193
Changes in value on the recognition of inflation effects		—		—		—		—		—		(29)		—		—		—		(29)		(29)
Amortization as of December 31, 2020	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	(6,501)	Ps.	—	Ps.	(734)	Ps.	(1,756)	Ps.	(8,991)	Ps.	(8,991)

Rights to Produce

and Distribute

Other Indefinite

Total

Technology

Total

Coca-Cola

Lived

Unamortized

Costs and

Systems in

Amortized

Intangible

Carrying Amount

Trademark Products

Goodwill

Trademark Rights

Intangible Assets

Management Systems

Development

Alcohol Licenses

Other

Intangible Assets

Assets

As of December 31, 2018

Ps.

87,617

Ps.

40,530

Ps.

6,699

Ps.

1,977

Ps.

136,823

Ps.

4,270

Ps.

777

Ps.

1,224

Ps.

2,516

Ps.

8,787

Ps.

145,610

As of December 31, 2019

Ps.

81,255

Ps.

47,906

Ps.

6,600

Ps.

2,160

Ps.

137,921

Ps.

4,356

Ps.

675

Ps.

1,192

Ps.

2,418

Ps.

8,641

Ps.

146,562

As of December 31, 2020

Ps.

76,649

Ps.

52,820

Ps.

8,647

Ps.

1,424

Ps.

139,540

Ps.

4,368

Ps.

432

Ps.

1,163

Ps.

9,998

Ps.

15,961

Ps.

155,501

For the years ended December 31, 2020, 2019 and 2018, the Company did not recognize any capitalization of borrowing costs.

For the years ended 2020, 2019 and 2018, allocation for amortization expense is as follows:


	2020		2019		2018

Cost of goods sold	Ps.	288	Ps.	317	Ps.	399
Administrative expenses		1,412		953		858
Selling expenses		765		542		656
	Ps.	2,465	Ps.	1,812	Ps.	1,913

The average remaining period for the Company’s intangible assets that are subject to amortization is as follows:



		Years
Technology Costs and Management Systems		3 - 10
Alcohol Licenses		10 - 12

Coca-Cola FEMSA 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 a CGU.

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


	December 31, 2020		December 31, 2019
Mexico	Ps.	56,352	Ps.	56,352
Guatemala		1,755		1,679
Nicaragua		433		420
Costa Rica		1,425		1,442
Panama		1,200		1,131
Colombia		4,414		4,367
Brazil		31,741		38,765
Argentina		312		306
Uruguay		2,450		2,626
Total	Ps.	100,082	Ps.	107,088

Goodwill and distribution rights are tested for impairments annually. The recoverable amounts are based on value in use calculations. The value in use of a CGU is determined based on the discounted cash flows method generated from the continuing use of the CGU.

The foregoing forecasts reflect the outcomes that Coca-Cola FEMSA consider most likely to occur based on the current situation of each of the CGUs including the macroeconomic situation in each CGU including the potential continue impacts of the COVID-19 pandemic which has heightened the inherent uncertainty in such estimations, the foregoing forecasts could differ from the results obtained over time.

The value in use of a CGU is determined based on the discounted cash flows method. The key assumptions used to calculate value in use are: volume, expected annual long-term inflation, and the weighted average cost of capital (WACC) used to discount the projected cash flows.

To determine the discount rate, Coca-Cola FEMSA uses the WACC as determined for each of the cash generating units in real terms and as described in following paragraphs.

The estimated discount rates to perform the impairment test for each CGU consider market participants’ assumptions. Market participants were selected taking into consideration the size, operations and characteristics of the businesses that are similar to those of Coca-Cola FEMSA.

The discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated into the projected cash flow. The discount rate calculation is based on the opportunity cost to a market participant, considering the specific circumstances of Coca-Cola FEMSA and its operating segments and is derived from its WACC. The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Company’s investors. The cost of debt is estimated based on the interest-bearing borrowings Coca-Cola FEMSA is obliged to service, which is equivalent to the cost of debt based on the conditions that a creditor in the market would consider. Segment-specific risk is incorporated by applying beta factors which are evaluated annually based on publicly available market data.

Market participant assumptions are important because, not only do they include industry data for growth rates, management also assesses how the CGU’s position, relative to its competitors, might change over the forecasted period.

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. Coca-Cola FEMSA 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 WACC per each CGU was applied as a hurdle rate to discount cash flows to get the recoverable amount of the units; the calculation assumes size premium adjustments.

The key assumptions by CGU for impairment test as of December 31, 2020 were as follows:


					Expected Annual Long-		Expected Volume
					Term Inflation		Growth Rates
CGU	Pre-tax WACC		Post-tax WACC		2021‑2030		2021‑2030
Mexico	7.4	%	5.3	%	3.9	%	2.0	%
Colombia	11.0	%	7.3	%	2.8	%	4.1	%
Costa Rica	15.3	%	10.8	%	2.7	%	4.3	%
Guatemala	10.6	%	8.3	%	3.1	%	6.8	%
Nicaragua	20.6	%	13.9	%	3.7	%	7.1	%
Panama	8.8	%	6.8	%	1.5	%	7.9	%
Argentina	26.3	%	20.4	%	30.1	%	3.9	%
Brazil	9.1	%	6.0	%	3.0	%	2.4	%
Uruguay	9.9	%	7.1	%	7.8	%	2.0	%

The key assumptions by CGU for impairment test as of December 31, 2019 were as follows:


					Expected Annual Long-		Expected Volume
					Term Inflation		Growth Rates
CGU	Pre-tax WACC		Post-tax WACC		2020‑2029		2020‑2029
Mexico	7.3	%	5.2	%	3.5	%	0.7	%
Colombia	8.9	%	6.2	%	3.1	%	4.0	%
Costa Rica	13.8	%	9.7	%	2.2	%	2.1	%
Guatemala	9.1	%	7.1	%	4.0	%	8.5	%
Nicaragua	21.1	%	12.4	%	4.4	%	3.0	%
Panama	8.5	%	6.6	%	2.0	%	5.4	%
Argentina	21.6	%	14.8	%	39.2	%	3.7	%
Brazil	9.3	%	5.6	%	3.6	%	2.0	%
Uruguay	9.4	%	6.8	%	7.4	%	2.0	%

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). Coca-Cola FEMSA consistently applied its methodology to determine CGU specific WACC’s to perform its annual impairment testing.

Sensitivity to Changes in Assumptions

At December 31, 2020, Coca-Cola FEMSA performed an additional impairment sensitivity calculation, taking into account an adverse change in post-tax WACC, according to the country risk premium, using for each country the relative standard deviation between equity and sovereign bonds and an additional sensitivity to the volume of 100 basis points and concluded that no impairment would be recorded.


			Change in Volume
CGU	Change in WACC		Growth CAGR (1)		Effect on Valuation
Mexico	+0.4	%	‑1.0	%	Passes by 4.8x
Colombia	+0.4	%	‑1.0	%	Passes by 1x
Costa Rica	+1.1	%	‑1.0	%	Passes by 2.1x
Guatemala	+0.6	%	‑1.0	%	Passes by 29.7x
Nicaragua	+1.7	%	‑1.0	%	Passes by 1.1x
Panama	+0.3	%	‑1.0	%	Passes by 6.9x
Argentina	+3.0	%	‑1.0	%	Passes by 6.7x
Brazil	+0.6	%	‑1.0	%	Passes by 1.8x
Uruguay	+0.4	%	‑1.0	%	Passes by 2x

(1)

Compound Annual Growth Rate (“CAGR”).

FEMSA Comercio – Proximity Division, FEMSA Comercio – Health Division and FEMSA Comercio – Fuel Division Impairment Test for Cash-Generating Units Containing Goodwill

For the purpose of impairment testing, goodwill is allocated and monitored on an individual country basis by operating segment. The Company has integrated its cash generating units as follows: (i) FEMSA Comercio – Proximity Division is integrated as Mexico, and (ii) FEMSA Comercio – Health Division are integrated as Mexico, Chile, Colombia and Ecuador for each of them and (iii) FEMSA Comercio – Fuel Division includes only Mexico.

As of December 31, 2020 in FEMSA Comercio – Health Division there is a significant carrying amount of goodwill allocated in Chile and Colombia as a cash generating unit (South America) with a total carrying amount of Ps. 6,681.

The recoverable amounts are based on value in use. The value in use of CGUs is determined based on the method of discounted cash flows. The key assumptions used in projecting cash flows are: sales, expected annual long-term inflation, and the weighted average cost of capital (“WACC”) used to discount the projected cash flows. The cash flow forecasts could differ from the results obtained over time; however, the Company prepares its estimates based on the current situation of each of the CGUs or group of CGUs.

To determine the discount rate, the Company uses the WACC as determined for each of the cash generating units or group of the cash generating units in real terms and as described in following paragraphs.

The estimated discount rates to perform the IAS 36 “Impairment of assets,” impairment test for each CGU or group of CGUs consider market participants’ assumptions. Market participants were selected taking into consideration the size, operations and characteristics of the businesses that are similar to those of FEMSA Comercio –Health Division.

The discount rates represent the current market assessment of the risks specific to each CGU or group of CGUs, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the opportunity cost to a market participant, considering the specific circumstances of the Company and its operating segments and is derived from its WACC. The WACC takes into account both debt and cost of equity. The cost of equity is derived from the expected return on investment by Company’s investors. The cost of debt is based on the interest-bearing borrowings the Company is obliged to service, which is equivalent to the cost of debt based on the conditions that a creditor would assess in the market. Segment-specific risk is incorporated by applying beta factors which are evaluated annually based on publicly available market data.

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. The Company believes that this forecasted period is justified due to the non-current nature of the business and past experiences.

Cash flows projected based on actual operating results and five-year business plan were calculated using a perpetual growth rate equal to the expected annual population growth, in order to calculate the terminal recoverable amount.

A per CGU-specific WACC was applied by FEMSA Comercio – Health Division as a hurdle rate to discount cash flows to get the recoverable amount of the units; the calculation assumes size premium adjustments.

The key assumptions by CGU for impairment test as of December 31, 2020 were as follows:


					Expected Annual
					Long-Term Inflation		Expected Volume Growth
CGU	Pre-tax WACC		Post-tax WACC		2021‑2030		Rates 2021‑2030
South America	8.3	%	5.8	%	2.8	%	0.2	%
(FEMSA Comercio – Health Division)

The key assumptions by CGU for impairment test as of December 31, 2019 were as follows:


					Expected Annual		Expected Volume
			Post-tax		Long-Term Inflation		Growth Rates
CGU	Pre-tax WACC		WACC		2020‑2029		2020‑2029
South America	9.4	%	6.6	%	3.0	%	0.3	%
(FEMSA Comercio – Health Division)

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

At December 31, 2020, the Company performed an additional impairment sensitivity calculation, taking into account an adverse change in post-tax WACC, according to the country risk premium, using for each country the relative standard deviation between equity and sovereign bonds and a sensitivity analysis of sales that would be affected considering a contraction in economic conditions as a result of lower purchasing power of customers, which based on management estimation considered to be reasonably possible an effect of 100 basis points in the sale’s compound annual growth rate (“CAGR”), concluding that no impairment would be recognized.


			Change in Sales
CGU	Change in WACC		Growth CAGR (1)		Effect on Valuation
FEMSA Comercio – Health Division (South America)	+0.2	%	‑0.5	%	Passes by 1.34x

(1)

Compound Annual Growth Rate (“CAGR”).

Other Businesses Impairment Test for Cash-Generating Units Containing Goodwill and trademark rights.

For the purpose of impairment testing, goodwill and trademark rights are allocated and monitored on an individual country basis, which is considered to be a CGU. The Company has integrated its cash generating units as a specialized distribution platform for cleaning products and consumables, located in United States.

As of December 31, 2020 in specialized distribution there is a significant carrying amount of goodwill and trademark rights as a cash generating unit with a total carrying amount of Ps. 10,169. Goodwill and trademark rights are tested for impairments annually.

The discount rates represent the current market assessment of the risks specific to each CGU or group of CGUs, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the opportunity cost to a market participant, considering the specific circumstances of the Company and its operating segments and is derived from its WACC. The WACC takes into account both debt and cost of equity. The cost of equity is derived from the expected return on investment by the Company’s investors. The cost of debt is based on the interest-bearing borrowings the Company is obliged to service, which is equivalent to the cost of debt based on the conditions that a creditor would assess in the market. Segment-specific risk is incorporated by applying beta factors which are evaluated annually based on publicly available market data.

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

A per CGU-specific WACC was applied by specialized distribution as a hurdle rate to discount cash flows to get the recoverable amount of the units; the calculation assumes size premium adjustments.

The key assumptions by CGU for impairment test as of December 31, 2020 were as follows:


					Expected Annual
					Long-Term Inflation		Expected Volume Growth
CGU	Pre-tax WACC		Post-tax WACC		2021‑2025		Rates 2021‑2025
United States	8.2	%	6.0	%	2.0	%	1.7	%
(Specialized Distribution)

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

(1)

Compound Annual Growth Rate (“CAGR”).

Other Assets and Other Financial Assets

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Other Assets and Other Financial Assets

Note 14. Other Assets and Other Financial Assets

14.1 Other non-current assets


	December 31,		December 31,
	2020		2019
Agreement with customers	Ps.	731	Ps.	953
Long-term prepaid advertising expenses		333		341
Guarantee deposits (1)		2,009		2,407
Prepaid bonuses		239		226
Advances to acquire property, plant and equipment		184		203
Recoverable taxes		1,701		2,111
Indemnifiable assets from business combinations		1,609		2,948
Others		720		1,343
	Ps.	7,526	Ps.	10,532

(1)

As it is customary in Brazil, the Company is required to guarantee tax, legal and labor contingencies by guarantee deposits including those related to business acquisitions. See Note 26.7.

14.2 Other non-current financial assets


	December 31,		December 31,
	2020		2019
Non-current accounts receivable	Ps.	983	Ps.	938
Derivative financial instruments (see Note 21)		14,283		8,260
Others		334		172
Other investments in equity instruments(1)		16,786		13,310
	Ps.	32,386	Ps.	22,680

(1)

Corresponds to the acquisition of a minority stake in Jetro Restaurant Depot as of November 8, 2019. On October 9, 2020, the Company acquired an additional minority stake in Jetro. Refer to Note 3.7.3.

As of December 31, 2020 and 2019, the fair value of non-current accounts receivable amounted to Ps. 699 and Ps. 724, respectively. The fair value is calculated based on the discounted value of contractual cash flows whereby the discount rate is estimated using rates currently offered for receivable of similar amounts and maturities, which is considered to be level 2 in the fair value hierarchy.

Balances and Transactions with Related Parties and Affiliated Companies

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Balances and Transactions with Related Parties and Affiliated Companies

Note 15. Balances and Transactions with Related Parties and Affiliated Companies

Balances and transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note.

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


	December 31,		December 31,
	2020		2019
Balances
Due from The Coca-Cola Company (see Note 7) (1) (8)	Ps.	509	Ps.	802
Balance with BBVA Bancomer, S.A. de C.V. (2)		1,092		6,798
Balance with Grupo Scotiabank Inverlat, S.A. (3)		2,016		510
Due from Heineken Group (1) (3) (7)		2,512		2,915
Other receivables (1) (4)		746		390
Due to The Coca-Cola Company (5) (6) (8)	Ps.	3,513	Ps.	4,417
Due to BBVA Bancomer, S.A. de C.V. (5)		1,062		1,696
Due to Heineken Group (6) (7)		3,273		4,308
Due to Grupo Financiero Scotiabank Inverlat, S.A. (5)		105		104
Other payables (6)		2,060		2,003

(1)

Presented within accounts receivable.

(2)

Presented within cash and cash equivalents.

(3)

Presented within other financial assets.

(4)

Presented within other current financial assets.

(5)

Recorded within bank loans and notes payable.

(6)

Recorded within accounts payable.

(7)

Associates.

(8)

Non-controlling interest.

Balances due from related parties are considered to be recoverable. Accordingly, for the years ended December 31, 2020, 2019 and 2018, there was no expense resulting from uncollectible balances due from related parties.


Transactions	2020		2019		2018
Income:
Services to Heineken Group (1)	Ps.	3,181	Ps.	3,380	Ps.	3,265
Logistic services to Grupo Industrial Saltillo, S.A. de C.V. (3)		—		—		255
Logistic services to Jugos del Valle (1)		532		553		369
Interest revenues from BBVA Bancomer, S.A. de C.V. (3)		1,825		1,456		1,469
Interest revenues from Grupo Financiero Scotiabank Inverlat, S.A. (3)		295		447		––
Other revenues from related parties		764		404		242
Expenses:
Purchase of concentrate from The Coca-Cola Company (2)	Ps.	32,222	Ps.	34,063	Ps.	32,379
Purchases of beer from Heineken Group (1) (5)		23,233		25,215		27,999
Purchase of baked goods and snacks from Grupo Bimbo, S.A.B. de C.V. (3)		5,774		6,194		5,763
Advertisement expense paid to The Coca-Cola Company (2) (4)		865		1,756		2,193
Purchase of juices from Jugos del Valle, S.A.P.I. de C.V. (1)		4,055		4,477		4,537
Purchase of sugar from Promotora Industrial Azucarera, S.A. de C.V. (1)		2,123		2,728		2,604
Interest expense and fees paid to BBVA Bancomer, S.A. de C.V. (3)		232		144		230
Purchase of sugar from Beta San Miguel (3)		1,023		655		651
Purchase of sugar, cans and aluminum lids from Promotora Mexicana de Embotelladores, S.A. de C.V. (3)		—		—		739
Purchase of canned products from IEQSA (1)		226		682		596
Purchases to AdeS Alimentos y Bebidas(1)		338		497		592
Purchase of inventories to Leao Alimentos e Bebidas, L.T.D.A. (1)		1,253		1,867		2,654
Purchases of Material with Ecolab, Inc (3)		340		—		—
Advertising paid to Grupo Televisa, S.A.B. (3)		148		115		113
Insurance premiums for policies with Grupo Nacional Provincial, S.A.B. (3)		7		—		12
Donations to Fundación FEMSA, A.C. (3)		171		195		232
Donations to Difusión y Fomento Cultural, A.C. (3)		55		61		63
Donations to ITESM (3)		310		215		192
Other expenses with related parties		619		319		423

(1)

Associates.

(2)

Non-controlling interest.

(3)

Members of the board of directors in FEMSA participate in the board of directors of this entity.

(4)

Net of the contributions from The Coca-Cola Company of Ps. 1,482, Ps. 2,274 and Ps. 3,542, for the years ended in 2020, 2019 and 2018, respectively.

(5)

Favorable resolution of Arbitration in Brazil on October 31, 2019, the arbitration tribunal in charge of the arbitration proceeding between Coca-Cola FEMSA and Cervejarias Kaiser Brasil, S.A., a subsidiary of Heineken, N.V. (“Kaiser”), issued an award confirming that the distribution agreement pursuant to which Coca-Cola FEMSA distribute Kaiser’s portfolio in the country, including Heineken beer, shall continue in full force and effect through March 19, 2022.

Commitments with related parties


Related Party	Commitment	Conditions
Heineken Group	Supply	Supply of all beer products in Mexico’s OXXO stores. The contract may be renewed for five years or additional periods. At the end of the contract OXXO will not hold exclusive contract with another supplier of beer for the next 3 years. Commitment term, January 1st, 2010 to June 30, 2020.

On February 26, 2019, the Company through its subsidiary Cadena Comercial OXXO, S.A. de C.V. (“OXXO”) signed an agreement with HEINEKEN Group (“Cervezas Cuauhtémoc Moctezuma, S.A. de C.V.”) and both companies agreed to an extension of their existing commercial relationship with certain important changes. Under the terms of the agreement, signed in April 2019 and following a gradual process, OXXO started selling the beer brands of Grupo Modelo in certain regions of Mexico, covering the entire Mexican territory by the end of 2022.

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


	2020		2019		2018
Short-term employee benefits paid	Ps.	2,112	Ps.	2,163	Ps.	1,885
Postemployment benefits		45		48		37
Termination benefits		373		411		88
Share based payments		575		610		401

Balances and Transactions in Foreign Currencies

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Balances and Transactions in Foreign Currencies

Note 16. 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 the Company. For the three years ended on December 31, 2020, 2019 and 2018, the assets, liabilities and transactions denominated in foreign currencies, expressed in Mexican pesos (contractual amounts) are as follows:


	Assets					Liabilities
Balances	Short-Term		Long-Term		Short-Term			Long- Term
As of December 31, 2020
U.S. dollars	Ps.	69,612	Ps.	1,143	Ps.	5,590	Ps.	122,000
Euros		479		—		458		24,521
Other currencies		46		1,349		21		—
Total	Ps.	70,137	Ps.	2,492	Ps.	6,069	Ps.	146,521
As of December 31, 2019
U.S. dollars	Ps.	58,151	Ps.	452	Ps.	5,597	Ps.	57,075
Euros		877		—		363		21,122
Other currencies		620		1,593		58		1
Total	Ps.	59,648	Ps.	2,045	Ps.	6,018	Ps.	78,198


			Other Operating		Purchases
Transactions	Revenues		Revenues		of Raw Materials		Interest Expense		Consulting Fees		Asset Acquisitions		Other
For the year ended
December 31, 2020
U.S. dollars	Ps.	4,213	Ps.	1,478	Ps.	16,398	Ps.	13,660	Ps.	480	Ps.	79	Ps.	2,413
Euros		—		—		35		—		20		—		1
Other currencies		125		52		3		532		3		—		103
Total	Ps.	4,338	Ps.	1,530	Ps.	16,436	Ps.	14,192	Ps.	503	Ps.	79	Ps.	2,517
For the year ended
December 31, 2019
U.S. dollars	Ps.	5,487	Ps.	5,612	Ps.	17,941	Ps.	2,183	Ps.	718	Ps.	3,388	Ps.	4,348
Euros		—		—		538		397		33		5		2
Other currencies		1		982		—		—		2		—		132
Total	Ps.	5,488	Ps.	6,594	Ps.	18,479	Ps.	2,580	Ps.	753	Ps.	3,393	Ps.	4,482
For the year ended
December 31, 2018
U.S. dollars	Ps.	7,228	Ps.	130	Ps.	21,460	Ps.	2,309	Ps.	752	Ps.	2,166	Ps.	2,676
Euros		—		—		63		434		20		—		1
Other currencies		—		9		—		—		2		—		—
Total	Ps.	7,228	Ps.	139	Ps.	21,523	Ps.	2,743	Ps.	774	Ps.	2,166	Ps.	2,677

Mexican peso exchange rates effective 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,		April 9,
	2020	2019	2021
U.S. dollar	19.9487	18.8452	20.1765
Euro	24.5213	21.1223	23.8326

Employee Benefits

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Employee Benefits

Note 17. Employee Benefits

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

17.1 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, seniority premiums and post-retirement medical benefits, as well as the associated cost for the period, were determined using the following long-term assumptions for Mexico:


	December 31,		December 31,		December 31,
Mexico	2020		2019		2018
Financial:
Discount rate used to calculate the defined benefit obligation	7.20	%	7.50	%	9.40	%
Salary increase	4.50	%	4.50	%	4.60	%
Future pension increases	3.50	%	3.50	%	3.60	%
Healthcare cost increase rate	5.10	%	5.10	%	5.10	%
Biometric:
Mortality (1)	EMSSA 2009		EMSSA 2009		EMSSA 2009
Disability (2)	IMSS‑97		IMSS‑97		IMSS‑97
Normal retirement age	60 years		60 years		60 years
Employee turnover table (3)	BMAR 2007		BMAR 2007		BMAR 2007

Measurement date December:

(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 for each period were taken from a yield curve of Mexican Federal Government Treasury Bonds (known as CETES in Mexico) because there is no deep market in high quality corporate obligations in Mexican pesos.

In Mexico upon retirement, the Company purchases an annuity for the employee, 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				Post-Retirement
	Retirement		Seniority		Medical
	Plans		Premiums		Services		Total
2021	Ps.	702	Ps.	198	Ps.	26	Ps.	926
2022		335		168		28		531
2023		384		168		29		581
2024		398		170		31		599
2025		496		176		33		705
2026 to 2030		3,118		791		199		4,108

17.2 Balances of the liabilities for employee benefits


	December 31,		December 31,
	2020		2019
Pension and Retirement Plans:
Defined benefit obligation	Ps.	7,679	Ps.	7,193
Pension plan funds at fair value		(2,788)		(2,678)
Net defined benefit liability	Ps.	4,891	Ps.	4,515
Seniority Premiums:
Defined benefit obligation	Ps.	1,763	Ps.	1,237
Seniority premium plan funds at fair value		(137)		(127)
Net defined benefit liability	Ps.	1,626	Ps.	1,110
Postretirement Medical Services:
Defined benefit obligation	Ps.	812	Ps.	797
Medical services funds at fair value		(76)		(75)
Net defined benefit liability	Ps.	736	Ps.	722
Total Employee Benefits	Ps.	7,253	Ps.	6,347

17.3 Trust assets

Trust assets consist of fixed and variable return financial instruments recorded at fair value (Level 1), which are invested as follows:


	December 31,		December 31,
	2020		2019
Fixed return:
Traded securities	27	%	9	%
Bank instruments	9	%	23	%
Federal government instruments of the respective countries	29	%	33	%
Variable return:
Publicly traded shares	35	%	35	%
	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 instruments must be invested in Federal Government securities 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 supervise the trustee. 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 verifying the correct operation of the plans 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 to 10% for related parties, 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.

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


	December 31,		December 31,
	2020		2019
Debt:
El Puerto de Liverpool, S.A.B. de C.V.	Ps.	30	Ps.	30
Grupo Industrial Bimbo, S.A.B. de C. V.		5		31
BBVA Bancomer, S.A de C.V.		10		20
Grupo Financiero Banorte, S.A.B. de C.V.		—		8
Grupo Financiero Scotiabank Inverlat, S.A. de C.V.		10		10

Equity:
CEMEX, S.A.B. de C.V.		8		12
Grupo Financiero Banorte, S.A.B. de C.V.		8		1
Alfa, S.A.B. de C.V.		3		6
El Puerto de Liverpool, S.A.B. de C.V.		—		2
Grupo Aeroportuario del Suereste, S.A.B. de C.V.		2		—
Others		4		3

For the years ended December 31, 2020 and 2019, 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. There are no restrictions placed on the trustee’s ability to sell those securities. As of December 31, 2020 and 2019, the plan assets did not include securities of the Company in portfolio funds.

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


	Income Statement								AOCI (1)
					Gain or		Net Interest on
					Loss on		the Net Defined		Remeasurements
	Current		Past Service		Settlement or		Benefit		of the Net Defined
December 31, 2020	Service Cost		Cost		Curtailment		Liability		Benefit Liability
Pension and retirement plans	Ps.	372	Ps.	73	Ps.	—	Ps.	305	Ps.	2,024
Seniority premiums		239		—		—		91		483
Postretirement medical services		44		—		—		54		342
Total	Ps.	656	Ps.	73	Ps.	—	Ps.	450	Ps.	2,849
December 31, 2019
Pension and retirement plans	Ps.	279	Ps.	(45)	Ps.	2	Ps.	290	Ps.	1,608
Seniority premiums		139		161		—		57		162
Postretirement medical services		15		—		—		32		396
Total	Ps.	433	Ps.	116	Ps.	2	Ps.	379	Ps.	2,166


					Gain or		Net Interest on
					Loss on		the Net Defined		Remeasurements
	Current		Past Service		Settlement or		Benefit		of the Net Defined
December 31, 2018	Service Cost		Cost		Curtailment		Liability		Benefit Liability
Pension and retirement plans	Ps.	318	Ps.	—	Ps.	(5)	Ps.	304	Ps.	668
Seniority premiums		125		—		(8)		49		(63)
Postretirement medical services		25		—		(1)		34		41
Total	Ps.	468	Ps.	—	Ps.	(14)	Ps.	387	Ps.	646

(1)

Amounts accumulated in other comprehensive income as of the end of the period.

For the years ended December 31, 2020, 2019 and 2018, labor costs of Ps. 728, Ps. 433 and Ps. 468 have been included in the consolidated income statements in costs of goods sold, administrative expenses and selling expenses.

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


	December 31,		December 31,		December 31,
	2020		2019		2018
Amount accumulated in other comprehensive income as of the beginning of the period, net of tax	Ps.	1,624	Ps.	475	Ps.	892

Actuarial (gains) arising from exchange rates		(6)		(30)		(21)
Remeasurements during the year, net of tax		312		100		221
Actuarial losses and (gains) arising from changes in financial assumptions		139		1,071		(617)
Actuarial losses and (gains) arising from changes in demographic assumptions		27		—		—
Effect on settlement		3		8		—
Amount accumulated in other comprehensive income as of the end of the period, net of tax	Ps.	2,099	Ps.	1,624	Ps.	475

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.

17.5 Changes in the balance of the defined benefit obligation for post-employment


	December 31,		December 31,		December 31,
	2020		2019		2018
Pension and Retirement Plans:
Initial balance	Ps.	7,193	Ps.	6,189	Ps.	7,370
Current service cost		372		279		318
Past service (credit) cost		73		(45)		—
Interest expense		506		530		484
Settlement / Curtailment		—		2		(5)
Remeasurements of the net defined benefit obligation		326		859		(740)
Foreign exchange loss (gain)		37		(69)		(86)
Benefits paid		(828)		(582)		(450)
(Derecognition) acquisitions		—		30		(702)
Ending balance	Ps.	7,679	Ps.	7,193	Ps.	6,189
Seniority Premiums:
Initial balance	Ps.	1,237	Ps.	772	Ps.	783
Current service cost		239		139		125
Past service cost		—		161		—
Interest expense		101		68		57
Settlement		13		—		(8)
Remeasurements of the net defined benefit obligation		309		230		(115)
Benefits paid		(136)		(133)		(77)
Acquisitions		—		—		7
Ending balance	Ps.	1,763	Ps.	1,237	Ps.	772
Postretirement Medical Services:
Initial balance	Ps.	797	Ps.	418	Ps.	524
Current service cost		44		15		25
Interest expense		61		38		39
Curtailment / Settlement		—		—		(1)
Remeasurements of the net defined benefit obligation		(59)		356		(143)
Benefits paid		(31)		(30)		(26)
Ending balance	Ps.	812	Ps.	797	Ps.	418

17.6 Changes in the balance of plan assets


	December 31,		December 31,		December 31,
	2020		2019		2018
Total Plan Assets:
Initial balance	Ps.	2,880	Ps.	2,680	Ps.	3,304
Actual return on trust assets		113		174		47
Foreign exchange loss (gain)		3		2		(1)
Life annuities		5		24		35
Benefits paid		—		—		(1)
(Derecognition) acquisitions		—		—		(704)
Ending balance	Ps.	3,001	Ps.	2,880	Ps.	2,680

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

17.7 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, the salary increase rate and healthcare cost 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.

Healthcare cost increase rate: The rate that considers the trends of health care costs which implies an impact on the postretirement medical service obligations and the cost for the year.

The following table presents the amount of defined benefit plan expense and OCI impact in absolute terms of a variation of 1% in the assumptions on the net defined benefit liability associated with the Company’s defined benefit plans. The sensitivity of this 1% on the significant actuarial assumptions is based on a projected long-term discount rates for Mexico and a yield curve projection of long-term Mexican government bonds - CETES:


+1%:	Income Statement						OCI(1)
			Gain or		Effect of Net		Remeasurements
Discount rate used to calculate the defined benefit			Loss on		Interest on the Net		of the Net Defined
obligation and the net interest on the net defined	Current		Settlement or		Defined Benefit		Benefit Liability
benefit liability	Service Cost		Curtailment		Liability (Asset)		(Asset)
Pension and retirement plans	Ps.	400	Ps.	—	Ps.	237	Ps.	1,784
Seniority premiums		223		—		80		432
Postretirement medical services		40		—		47		290
Total	Ps.	663	Ps.	—	Ps.	364	Ps.	2,506

Expected salary increase
Pension and retirement plans	Ps.	466	Ps.	—	Ps.	339	Ps.	1,984
Seniority premiums		241		—		93		514
Seniority premiums		44		—		54		342
Total	Ps.	751	Ps.	—	Ps.	486	Ps.	2,840

Assumed rate of increase in healthcare costs
Postretirement medical services	Ps.	52	Ps.	—	Ps.	64	Ps.	375


-1%:
			Gain or		Effect of Net		Remeasurements
Discount rate used to calculate the defined benefit			Loss on		Interest on the Net		of the Net Defined
obligation and the net interest on the net defined	Current		Settlement or		Defined Benefit		Benefit Liability
benefit liability	Service Cost		Curtailment		Liability (Asset)		(Asset)
Pension and retirement plans	Ps.	458	Ps.	—	Ps.	366	Ps.	2,025
Seniority premiums		257		—		99		521
Postretirement medical services		50		—		62		364
Total	Ps.	765	Ps.	—	Ps.	527	Ps.	2,910

Expected salary increase
Pension and retirement plans	Ps.	396	Ps.	—	Ps.	265	Ps.	1,820
Seniority premiums		235		—		90		432
Total	Ps.	631	Ps.	—	Ps.	355	Ps.	2,252

Assumed rate of increase in healthcare costs
Postretirement medical services	Ps.	38	Ps.	—	Ps.	45	Ps.	276

(1)

Amounts accumulated in other comprehensive income as of the end of the period.

17.8 Employee benefits expense

For the years ended December 31, 2020, 2019 and 2018, employee benefits expenses recognized in the consolidated income statements as cost of goods sold, administrative and selling expenses are as follows:


	2020		2019		2018
Wages and salaries	Ps.	68,312	Ps.	64,776	Ps.	58,745
Social security costs		11,595		11,494		10,486
Employee profit sharing		1,112		1,205		1,294
Post-employment benefits		1,002		795		842
Share-based payments		575		200		405
Termination benefits		201		169		132
	Ps.	82,797	Ps.	78,639	Ps.	71,904

Bonus Programs

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Bonus Programs

Note 18. Bonus Programs

18.1 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 the EVA generated by the Company, calculated at approximately 70% and 30%, respectively. 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 bonus is paid to the eligible employee on an annual basis and after withholding applicable taxes.

18.2 Share-based payment bonus plan

The Company has implemented a stock incentive plan for the benefit of its senior executives. As discussed above, this plan uses as its main evaluation metric the EVA. Under the EVA stock incentive plan, eligible employees are entitled to receive a special annual bonus (fixed amount), to be paid in shares of FEMSA or Coca-Cola FEMSA, as applicable or stock options (the plan considers providing stock options to employees; however, since inception only shares of FEMSA or Coca-Cola FEMSA have been granted).

The plan is managed by FEMSA’s chief executive officer (“CEO”), with the support of the board of directors, together with the CEO of the respective sub-holding company. FEMSA’s Board of Directors is responsible for approving the plan’s structure, and the annual amount of the bonus. Each year, FEMSA’s CEO in conjunction with the Evaluation and Compensation Committee of the board of directors and the CEO of the respective sub-holding company determine the employees eligible to participate in the plan and the bonus formula to determine the number of shares to be received. Until 2015 the shares were vested ratably over a six-year period, beginning with January 1, 2016 onwards they were ratably vest over a four-year period, with retrospective effects, on existing grants recognized in 2016. FEMSA accounts for its share-based payment bonus plan as an equity-settled share-based payment transaction as it will ultimately settle its obligations with its employees by issuing its own shares or those of its subsidiary Coca-Cola FEMSA.

The Company contributes the individual employee’s special bonus (after taxes) in cash to the Administrative Trust (which is controlled and consolidated by FEMSA), who then uses the funds to purchase FEMSA or Coca-Cola FEMSA shares (as instructed by the Administrative Trust’s Technical Committee), which are then allocated to such employee. The Administrative Trust tracks the individual employees’ account balance. FEMSA created the Administrative Trust with the objective of conducting the purchase of FEMSA and Coca-Cola FEMSA shares by each of its subsidiaries with eligible executives participating in the stock incentive plan. The Administrative Trust’s objectives are to acquire FEMSA shares or shares of Coca-Cola FEMSA and to manage the shares granted to the individual employees based on instructions set forth by the Technical Committee. Once the shares are acquired following the Technical Committee’s instructions, the Administrative Trust assigns to each participant their respective rights. As the trust is controlled and therefore consolidated by FEMSA, shares purchased in the market and held within the Administrative Trust are presented as treasury stock (as it relates to FEMSA’s shares) or as a reduction of the noncontrolling interest (as it relates to Coca-Cola FEMSA’s shares) in the consolidated statement of changes in equity, on the line issuance (purchase) of shares associated with share-based payment plans. Should an employee leave prior to their shares vesting, such employee would lose the rights to such shares, which would then remain within the Administrative Trust and be able to be reallocated to other eligible employees as determined by the Company. 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. For the years ended December 31, 2020, 2019 and 2018, the compensation expense recorded in the consolidated income statement amounted to Ps. 575, Ps. 610 and Ps. 401, respectively.

All shares held in the Administrative Trust are considered outstanding for diluted earnings per share purposes and dividends on shares held by the trust are charged to retained earnings.

As of December 31, 2020 and 2019, the number of shares held by the trust associated with the Company’s share-based payment plans are as follows:


	Number of Shares
	FEMSA UBD		KOF UBL
	2020	2019	2020	2019
Beginning balance	2,249,665	2,278,460	752,847	697,226
Shares acquired by the administrative trust to employees	2,445,983	1,441,838	985,535	456,077
Shares released from administrative trust to employees upon vesting	(1,280,748)	(1,470,633)	(378,224)	(400,456)
Ending balance	3,414,900	2,249,665	1,360,158	752,847

The fair value of the shares held by the trust as of the end of December 31, 2020 and 2019 was Ps. 638 and Ps. 488, respectively, based on quoted market prices of those dates.

Bank Loans and Notes Payable

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Bank Loans and Notes Payable

Note 19. Bank Loans and Notes Payable


		At December 31, (1)
														Carrying			Fair		Carrying
												2026		Value at			Value at		Value at
												and		December			December		December
(in millions of Mexican pesos)	2021			2022		2023		2024		2025		Thereafter		31, 2020			31, 2020		31, 2019(1)
Short-term debt:
Fixed rate debt:
Colombian pesos
Bank loans	Ps.	168		Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	168		Ps.	168	Ps.	769
Interest rate		2.1	%		—		—		—		—		—		2.1	%		—		5.1	%
Argentine pesos
Bank loans		711			—		—		—		—		—		711			711		126
Interest rate		44.7	%		—		—		—		—		—		44.7	%		—		63.5	%
Chilean pesos
Bank loans		1,027			—		—		—		—		—		1,027			1,027		977
Interest rate		1.9	%		—		—		—		—		—		1.9	%		—		2.6	%
U.S. dollars
Bank loans		1,150			—		—		—		—		—		1,150			1,150		1,038
Interest rate		2.0	%		—		—		—		—		—		2.0	%		—		2.6	%
Uruguayan pesos
Bank loans		498			—		—		—		—		—		498			498		63
Interest rate		15.1	%		—		—		—		—		—		15.1	%		—		11.6	%
Guatemalan quetzal
Bank loans		63			—		—		—		—		—		63			63		—
Interest rate		6.3	%		—		—		—		—		—		6.3	%		—		—
Variable rate debt:
Mexican pesos
Bank loans		360			—		—		—		—		—		360			360		100
Interest rate		5.2	%		—		—		—		—		—		5.2	%		—		7.9	%
Colombian pesos
Bank loans		492			—		—		—		—		—		492			492		431
Interest rate		3.0	%		—		—		—		—		—		3.0	%		—		4.7	%
Argentine pesos
Bank loans		—			—		—		—		—		—		—			—		32
Interest rate		—			—		—		—		—		—		—			—		54.3	%
Brazilian reals
Bank loans		—			—		—		—		—		—		—			—		399
Interest rate		—			—		—		—		—		—		—			—		9.4	%
Total short-term debt	Ps.	4,469		Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	—	Ps.	4,469		Ps.	4,469	Ps.	3,935


		At December 31, (1)
																			Carrying			Fair		Carrying
																2026			Value at			Value at		Value at
																and			December			December		December
(in millions of Mexican pesos)	2021			2022			2023			2024			2025			Thereafter			31, 2020			31, 2020		31, 2019(1)
Long-term debt:
Fixed rate debt:
Euro
Senior unsecured notes	Ps.	—		Ps.	—		Ps.	24,469		Ps.	—		Ps.	—		Ps.	—		Ps.	24,469		Ps.	25,517	Ps.	21,046
Interest rate		—			—			1.7	%		—			—			—			1.7	%		—		1.7	%
U.S. dollars
Yankee bond		—			—			—			—			—			50,597			50,597			57,967		37,575
Interest rate		—			—			—			—			—			3.1	%		3.1	%		—		4.5	%
Bank of NY (FEMSA USD 2023)		—			—			5,975			—			—			—			5,975			6,258		5,593
Interest rate (1)		—			—			2.9	%		—			—			—			2.9	%		—		2.9	%
Bank of NY (FEMSA USD 2043)		—			—			—			—			—			13,805			13,805			17,486		12,943
Interest rate (1)		—			—			—			—			—			4.4	%		4.4	%		—		4.4	%
Bank of NY (FEMSA USD 2050)		—			—			—			—			—			49,549			49,549			55,422		—
Interest rate (1)		—			—			—			—			—			3.5	%		3.5	%		—		—
Bank loans		—			—			—			2,293			—			—			2,293			2,293		2,185
Interest rate		—			—			—			3.7	%		—			—			3.7	%		—		3.6
Mexican pesos
Domestic senior notes		2,502			—			7,496			—			—			11,485			21,483			22,638		18,484
Interest rate		8.3	%		—			5.5	%		—			—			7.7	%		7.0	%		—		6.9	%
Bank loans		48			38			32			25			22			—			165			165		115
Interest rate		9.1	%		9.9	%		9.5	%		9.0	%		8.7	%		—			9.3	%		—		9.3	%
Brazilian reais
Bank loans		59			50			28			19			1			—			157			157		434
Interest rate		5.7	%		6.0	%		6.4	%		6.6	%		6.6	%		—			6.1	%		—		7.3	%
Chilean pesos
Bank loans		15			—			—			—			—			—			15			15		40
Interest rate		3.2	%		—			—			—			—			—			3.2	%		—		3.4	%
Uruguayan pesos
Bank loans		770			261			—			—			—			—			1,031			1,031		1,265
Interest rate		10.3	%		12.2	%		—			—			—			—			10.8	%		—		5.8	%
Subtotal	Ps.	3,394		Ps.	349		Ps.	38,000		Ps.	2,337		Ps.	23		Ps.	125,436		Ps.	169,539		Ps.	188,949	Ps.	99,680

(1)

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


		At December 31, (1)
																			Carrying			Fair		Carrying
																2026			Value at			Value at		Value at
(in millions																and			December			December		December
of Mexican pesos)	2021			2022			2023			2024			2025			Thereafter			31, 2020			31, 2020		31, 2019(1)
Variable rate debt:
Mexican pesos
Domestic senior notes		—			1,459			—			—			1,722			—			3,181			3,176		1,459
Interest rate (1)		—			4.7	%		—			—			4.6	%		—			4.6	%		—		8.0	%
Bank Loans		238			102			54			367			6,003			3,007			9,771			9,834		9,864
Interest rate (1)		5.8	%		6.0	%		6.2	%		5.3	%		5.0	%		5.2	%		8.4	%		—		8.4	%
Brazilian reais
Bank loans		43			4			—			—			—			—			47			48		242
Interest rate		8.1	%		8.1	%		—			—			—			—			8.1	%		—		7.8	%
Colombian pesos
Bank loans		18			7			—			—			—			—			25			25		422
Interest rate		4.4	%		4.4	%		—			—			—			—			4.4	%		—		5.7	%
Chilean pesos
Bank loans		639			657			337			—			—			—			1,633			1,633		2,349
Interest rate		5.8	%		2.0	%		2.0	%		—			—			—			3.5	%		—		4.1	%
Subtotal	Ps.	938		Ps.	2,229		Ps.	391		Ps.	367		Ps.	7,725		Ps.	3,007		Ps.	14,657		Ps.	14,716	Ps.	14,336
Total long-term debt	Ps.	4,332		Ps.	2,578		Ps.	38,391		Ps.	2,704		Ps.	7,748		Ps.	128,443		Ps.	184,196		Ps.	203,665	Ps.	114,016
Current portion of long-term debt																				(4,332)					(12,269)
																			Ps.	179,864				Ps.	101,747

(1)

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


																2026 and			Total			Total
Hedging Derivative Financial Instruments (1)	2021			2022			2023			2024			2025			Thereafter			2020			2019
	(notional amounts in millions of Mexican pesos)																						`
Cross currency swaps:
U.S. dollars to Mexican pesos
Fixed to variable (3)	Ps.	—		Ps.	—		Ps.	11,403		Ps.	—		Ps.	—			9,575		Ps.	20,979		Ps.	11,403
Interest pay rate		—			—			5.7	%		—			—			9.5	%		7.5	%		8.8	%
Interest receive rate		—			—			4.0	%		—			—			3.9	%		4.0	%		4.0	%
Fixed to fixed		—			—			6,853			—			10,000			6,982			23,835			18,982
Interest pay rate		—			—			7.8	%		—			8.2	%		8.2	%		8.1	%		9.0	%
Interest receive rate		—			—			3.2	%		—			3.5	%		3.3	%		3.3	%		3.9	%
Fixed to fixed (2)
Interest pay rate		—			—			—			—			—			8.8	%		8.8	%		9.4	%
Interest receive rate		—			—			—			—			—			4.2	%		4.2	%		4.4	%
U.S. dollars to Brazilian reais
Fixed to fixed		—			—			—			—			—			—			—			4,365
Interest pay rate		—			—			—			—			—			—			—			8.3	%
Interest receive rate		—			—			—			—			—			—			—			2.9	%
Variable to fixed		—			—			—			—			—			—			—			9,046
Interest pay rate		—			—			—			—			—			—			—			9.5	%
Interest receive rate		—			—			—			—			—			—			—			3.9	%
Chilean pesos
Variable to fixed		—			—			—			—			—			—			—			163
Interest pay rate		—			—			—			—			—			—			—			6.9	%
Interest receive rate		—			—			—			—			—			—			—			4.7	%
Colombian pesos
Fixed to fixed		—			—			—			—			—			404			404			—
Interest pay rate		—			—			—			—			—			5.0%	%		5.0	%		—
Interest receive rate		—			—			—			—			—			2.4%	%		2.4	%		—
Interest rate swaps:
Mexican pesos
Variable to fixed rate:		449			458			1,515			2,294			—			—			4,716			4,353
Interest pay rate		7.6	%		6.6	%		5.8	%		3.6	%		—			—			5.0	%		4.9	%
Interest receive rate		1.0	%		4.0	%		1.8	%		3.7	%		—			—			2.9	%		3.9	%
Variable to fixed rate (3):
Interest pay rate		—			—			7.2	%		—			—			—			7.2	%		7.2	%
Interest receive rate		—			—			5.7	%		—			—			—			5.7	%		8.8	%

(1)

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

(2)

Cross Currency swaps which covers U.S. dollars to Mexican pesos with a notional of Ps.8,869, that have a starting date in 2023; receiving a fixed rate of 4.4% and pay a variable rate of 9.4%.

(3)

Interest rate swaps with a notional amount of Ps. 11,403 that receive a variable rate of 5.7% and pay a fixed rate of 7.2%; joined with a cross currency swap, which covers U.S. dollars to Mexican pesos, that receives a fixed rate of 4.0% and pay a variable rate of 5.7%.

For the years ended December 31, 2020, 2019 and 2018, the interest expense is comprised as follows:


	2020		2019		2018
Interest on debts and borrowings	Ps.	10,788	Ps.	6,434	Ps.	6,760
Capitalized interest		—		—		(5)
Finance charges for employee benefits		456		382		373
Derivative instruments		1,428		2,300		2,649
Finance operating charges		(231)		243		48
Finance charges payable for leases		5,075		4,774		—
	Ps.	17,516	Ps.	14,133	Ps.	9,825

In March 14, 2016, the Company issued long-term debt on the Irish Stock Exchange (“ISE”) in the amount of €. 1,000 million, which was made up of senior notes with a maturity of 7 years, a fixed interest rate of 1.75% and a spread of 155 basis points over the relevant benchmark mid-swap, for a total yield of 1.824%. The Company has designated this non-derivative financial liability as a hedge on the net investment in Heineken. For the year ended December 31, 2020, a foreign exchange gain, net of tax, has been recognized as part of the exchange differences on translation of foreign operations within the cumulative other comprehensive income of Ps. 2,379.

On January 16, 2020, the Company issued US $1,500 million 3.500% Senior Unsecured Notes at an annual rate of 130 basis points over the relevant benchmark. In addition, on February 12, 2020, the Company placed a re-tap to its US-denominated SEC-registered Senior Unsecured Notes due 2050 and issued US $300 million 3.500% at an annual rate of 137.5 basis points over the relevant benchmark, raising the total outstanding balance to US $1,800 million with an implied yield to maturity of 3.577%. In June 2020, the Company issued US $700 million 3.500% Senior Unsecured Notes due 2050 with an implicit weighted performance of 3.358%. The Company has designated a portion of these non-derivative financial liabilities as a hedge on the net investment. For the year ended December 31, 2020, a foreign exchange gain, net of tax, has been recognized as part of the income on hedge of net investments in foreign operations within the cumulative other comprehensive income of Ps. 3,439.

In March 2020, we entered into certain short-term bank loan in Mexican pesos for an aggregate principal amount of Ps.15,000 million.

Coca-Cola FEMSA has the following bonds:

registered with the Mexican stock exchange:

i) Ps. 2,500 (nominal amount) with a maturity date in 2021 and fixed interest rate of 8.27%; ii) Ps. 7,500 (nominal amount) with a maturity date in 2023 and fixed interest rate of 5.46%; iii) Ps. 1,500 (nominal amount) with a maturity date 2022 and floating interest rate of TIIE + 0.25%; iv) Ps. 1,727 (nominal amount) with a maturity date 2025 and floating interest rate of TIIE + 0.08%; v) Ps. 8,500 (nominal amount) with a maturity date 2027 and fixed interest rate of 7.87%; and vi) Ps. 3,000 (nominal amount) with a maturity date 2028 and fixed interest rate of 7.35%.

registered with the SEC:

i) Senior notes of US $1,250 with interest at a fixed rate of 2.75% and maturity date on January 22, 2030; ii) Senior notes of US $600 with interest at a fixed rate of 5.25% and maturity date on November 26, 2043, and iii) Senior notes of US $ 705 with interest at a fixed rate of 1.85% and maturity date on September 1, 2032.

The mentioned bonds are guaranteed by Coca-Cola FEMSA subsidiaries: Propimex, S. de R.L. de C.V., 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., Distribuidora y Manufacturera del Valle de Mexico, S. de R.L. de C.V (as successor guarantor of Servicios Integrados Inmuebles del Golfo, S. de R.L. de C.V.) and Yoli de Acapulco, S. de R.L. de C.V. (“Guarantors”).

During 2019 Coca-Cola FEMSA celebrated bank loans in Mexico for an amount of Ps. 9,400 at an interest rate of 8.39% and 7.91%, such loans were used to settled bank loans denominated in USD and for general corporate purposes. Additionally, the Company obtained during 2019 bank loans in Uruguay, Colombia and Argentina for an amount of Ps. 1,670.

During 2020, Coca-Cola FEMSA obtained (and paid off) bank loans to build liquidity in light of the recent COVID-19 pandemic: in Mexico for an amount of Ps. 15,650 at a weighted interest rate of 6.04%, in Argentina and Colombia for an amount of Ps. 1,184. Similarly, on January 22, 2020 Coca-Cola FEMSA prepaid senior notes during the same year in Mexico of US. $ 900, and on February 18, 2020, Coca-Cola FEMSA paid the total balance of its senior notes in of US. $ 500.

In addition, Coca-Cola FEMSA celebrated bank loans in Argentine and Uruguayan peso with some banks for Ps. 711 and Ps. 759, respectively.

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.

19.1 Reconciliation of liabilities arising from financing activities


	Carrying												Carrying
	Value at												Value at
	January		Cash Flows		Non-cash effects								December 31,
	1, 2020												2020
									Foreign
					Acquisition		New leases		Exchange		Others (1)
									Income
									(Loss)
Bank loans	Ps.	20,807	Ps.	(1,286)	Ps.	—	Ps.	—	Ps.	221	Ps.	(312)	Ps.	19,430
Notes payable		97,144		67,380		—		—		4,813		(101)		169,235
Total liabilities from financing activities		117,951		66,093		—		—		5,034		(413)		188,664
Financial leases		54,679		(9,810)		1,765		7,982		(584)		4,276		58,308
Total financing activities	Ps.	172,630	Ps.	56,283	Ps.	1,765	Ps.	7,982	Ps.	4,450	Ps.	3,863	Ps.	246,972

(1)

Includes mainly remeasurements of leases, and amortization of transaction costs.


	Carrying												Carrying
	Value at												Value at
	January												December
	1, 2019		Cash Flows			Non-cash effects							31, 2019
									Foreign
									Exchange
									Income
					Acquisition		New leases		(Loss)		Others
Bank loans	Ps.	22,944	Ps.	(2,999)	Ps.	1,917	Ps.	—	Ps.	(397)	Ps.	(658)	Ps.	20,807
Notes payable		105,720		(5,022)		—		—		(1,244)		(2,310)		97,144
Total liabilities from financing activities		128,664		(8,021)		1,917		—		(1,641)		(2,968)		117,951
Financial leases		50,220		(8,848)		2,187		7,490		(10)		3,640		54,679
Total liabilities from financing activities		178,884	Ps.	(16,869)	Ps.	4,104	Ps.	7,490	Ps.	(1,651)	Ps.	672	Ps.	172,630


	Carrying												Carrying
	Value at												Value at
	January												December
	1, 2018		Cash Flows			Non-cash effects							31, 2018
									Foreign
									Exchange
					Acquisition		New leases		Movement		Others
Bank loans	Ps.	13,669	Ps.	8,313	Ps.	1,147	Ps.	—	Ps.	417	Ps.	(602)	Ps.	22,944
Notes payable		117,551		(9,314)		—		—		(769)		(1,840)		105,628
Lease liabilities		128		(26)		—		—		(10)		—		92
Total liabilities from financing activities		131,348		(1,027)		1,147		—		(362)		(2,442)		128,664

Other Income and Expenses

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Other Income and Expenses

Note 20. Other Income and Expenses


	2020		2019		2018
Gain on sale of other assets	Ps.	—	Ps.	—	Ps.	344
Gain on sale of long-lived assets		130		—		174
Sale of waste material		20		21		13
Insurance rebates		35		—		10
Foreign exchange gain		112		26		123
Other investment in shares (5)		2,011		—		—
Recycling of cumulative gain on sale of joint venture		212		—		—
Recoveries of prior years(1)		594		896		—
Others		229		70		9
Other income	Ps.	3,343	Ps.	1,013	Ps.	673
Contingencies associated with prior acquisitions or disposals	Ps.	—	Ps.	149	Ps.	138
Loss on sale of property, plant and equipment		—		67		—
Recoveries of prior years		—		44		116
Impairment of long-lived assets (2)		5,102		1,018		432
Loss in write-off of intangible assets		375		—		—
Disposal of long-lived assets (3)		915		861		518
Contingencies		804		589		518
Severance payments (4)		465		1,207		264
Donations		605		489		528
Legal fees and other expenses from past acquisitions		—		17		149
Effect of taxes paid on previous years (6)		3,253		—		—
Other		862		464		284
Other expenses	Ps.	12,381	Ps.	4,905	Ps.	2,947

(1)

Following a favorable decision from Brazilian tax authorities received during 2020 and 2019, Coca-Cola FEMSA has been entitled to reclaim indirect tax payments made in prior years in Brazil, resulting in the recognition of a tax credit and a positive effect in the operating revenues and other income captions of the condensed consolidated income statements. See Note 25.1.1.

(2)

Includes impairment loss related to Compañía Panameña de Bebibas, S.A.P.I. de C.V., for an amount of Ps. 1,463 and Ps. 948 million in 2020 and 2019, respectively. Additionally, includes impairment loss related to Leao Alimentos e Bebidas, L.T.D.A., for an amount of Ps. 1,038 million in 2020. (see Note 10). Also, includes impairment loss related to Specialty’s, and Doña Tota in 2020 for an amount of Ps. 2,021 and Ps. 576, respectively. The impairment losses in 2020 were mainly driven by mobility restrictions that impacted customer behavior and the economic crisis generated by COVID-19 pandemic.

(3)

Charges related to fixed assets retirement from ordinary operations and other long-lived assets.

(4)

During 2019, the Company incurred restructuring costs related to some of their operations as part of an efficiency program.

(5)

During 2020, the Company received a dividend income related to its investment in Jetro Restaurant Depot.

(6)

Interest and penalties associated to taxes paid from previous years.

Financial Instruments

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Financial Instruments

Note 21. Financial Instruments

Fair Value of Financial Instruments

The Company’s financial assets and liabilities that are measured at fair value are based on 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, 2020 and 2019:


	December 31, 2020		December 31, 2019
	Level 1	Level 2	Level 1	Level 2
Financial instrument (current asset)	488	85	91	917
Financial instrument (non-current asset)	3,002	31,069	2,880	21,570
Financial instrument (current liability)	83	1,045	47	801
Financial instrument (non-current liability)	—	3,743	—	1,672

21.1 Total debt

The fair value of bank 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, 2020 and 2019, which is considered to be level 1 in the fair value hierarchy.


	2020		2019
Carrying value	Ps.	188,665	Ps.	117,951
Fair value		208,134		124,038

21.2 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 flow currency, and expresses the net result in the reporting currency. Changes in fair value are recorded in cumulative other comprehensive income, net of taxes until such time as the hedged amount is recorded in the consolidated income statements.

At December 31, 2020, the Company has the following outstanding interest rate swap agreements:


	Notional		Fair Value Liability		Fair Value Asset
Maturity Date	Amount		December 31, 2020		December 31, 2020
2021	Ps.	449	Ps.	(6)	Ps.	—
2022		458		(16)		—
2023		12,918		(492)		—
2024		2,294		(126)		—

At December 31, 2019, the Company has the following outstanding interest rate swap agreements:


	Notional		Fair Value Liability		Fair Value Asset
Maturity Date	Amount		December 31, 2019		December 31, 2019
2020	Ps.	4,365	Ps.	(142)	Ps.	—
2021		405		(24)		—
2022		414		(20)		—
2023		12,770		(79)		245
2024		3		—		—

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

21.3 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. Foreign exchange forward contracts measured at fair value are designated hedging instruments in cash flow hedges of forecast inflows in euros and forecast purchases of raw materials in U.S. dollars. These forecast transactions are highly probable.

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. 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 cost of goods sold when the raw material is included in sale transactions, and as a part of foreign exchange when the inflow in euros are received.

At December 31, 2020, the Company had the following outstanding forward agreements to purchase foreign currency:


	Notional		Fair Value Liability		Fair Value Asset
Maturity Date	Amount		December 31, 2020		December 31, 2020
2021	Ps.	9,042	Ps.	(1,040)	Ps.	4
2022		66		(41)		—
2023		23		(2)		—
2024		2		—		—

At December 31, 2019, the Company had the following outstanding forward agreements to purchase foreign currency:


	Notional		Fair Value Liability		Fair Value Asset
Maturity Date	Amount		December 31, 2019		December 31, 2019
2020	Ps.	8,447	Ps.	(292)	Ps.	34
2021		215		—		27
2022		52		—		5

21.4 Options to purchase foreign currency

The Company has executed call option and collar strategies to reduce its exposure to the risk of exchange rate fluctuations. A call option is an instrument that limits the loss in case of foreign currency depreciation. A collar is a strategy that combines call and put options, limiting 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. Changes in the fair value of these options, corresponding to the intrinsic value, are initially recorded as part of “cumulative other comprehensive income”. Changes in the fair value, corresponding to the extrinsic value, are recorded in the consolidated income statements under the caption “market value gain/ (loss) on financial instruments,” as part of the consolidated net income. Net gain/(loss) on expired contracts including the net premium paid, is recognized as part of cost of goods sold when the hedged item is recorded in the consolidated income statements.

At December 31, 2019, the Company paid a net premium of Ps. 43 million for the following outstanding collar options to purchase foreign currency:


	Notional		Fair Value Liability		Fair Value Asset
Maturity Date	Amount		December 31, 2019		December 31, 2019
2020	Ps.	107	Ps.	—	Ps.	2

21.5 Cross-currency swaps

The Company has contracted for a number of cross-currency swaps to reduce the risks of exchange rate and interest rate fluctuations associated with its borrowings denominated in U.S. dollars and other foreign currencies. Cross-currency swaps contracts are designated as hedging instruments through which the Company changes the debt profile to its functional currency to reduce exchange exposure.

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 long-term liability, within the consolidated income statements.

The Company has cross-currency contracts designated as cash flow hedges and are recognized in the consolidated statement of financial position at their estimated fair value. Changes in fair value are recorded in cumulative other comprehensive income, net of taxes until such time as the hedge amount is recorded in the consolidated income statement.

At December 31, 2020, the Company had the following outstanding cross – currency swap agreements:


	Notional		Fair Value Liability		Fair Value Asset
Maturity Date	Amount		December 31, 2020		December 31, 2020
2021	Ps.	4,575	Ps.	(5)	Ps.	169
2022		376		—		23
2023		24,103		—		10,808
2024		1,577		(9)		264
2025		10,750		(2,481)		—
2027		6,982		(464)		80
2029		1,519		—		122
2030		3,790		(107)		192
2043		8,869		—		2,706

At December 31, 2019, the Company had the following outstanding cross – currency swap agreements:


	Notional		Fair Value Liability		Fair Value Asset
Maturity Date	Amount		December 31, 2019		December 31, 2019
2020	Ps.	17,252	Ps.	(307)	Ps.	883
2021		702		—		49
2022		375		—		3
2023		23,466		(594)		7,122
2024		1,788		(53)		—
2026		772		(63)		—
2027		6,596		(843)		—
2029		1,371		—		121
2043		8,869		—		576

21.6 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. The fair value is estimated based on the market valuations to terminate the contracts at the end of the period. These instruments are designated as cash flow hedges and the changes in the fair value are recorded as part of “cumulative other comprehensive income.”

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

At December 31, 2020, Coca-Cola FEMSA had the following sugar price contracts:


	Notional		Fair Value Liability		Fair Value Asset
Maturity Date	Amount		December 31, 2020		December 31, 2020
2021	Ps.	1,260	Ps.	(18)	Ps.	275
2022		366		—		70

At December 31, 2019, Coca-Cola FEMSA had the following sugar price contracts:

At December 31, 2020, Coca-Cola FEMSA had the following aluminum price contracts:

At December 31, 2019, Coca-Cola FEMSA had the following aluminum price contracts:

At December 31, 2020, Coca-Cola FEMSA had the following PX+MEG (resine) contracts:


			Fair Value Liability
	Notional		December 31,
Maturity Date	Amount		2020
2021	Ps.	729	Ps.	(65)

At December 31, 2019, Coca-Cola FEMSA had the following PX+MEG (resine) contracts:


			Fair Value Liability
	Notional		December 31,
Maturity Date	Amount		2019
2020	Ps.	320	Ps.	(28)

21.7 Treasury Lock contracts

The Company has contracted a number of treasury locks to reduce its exposure to interest rate fluctuations associated with its USD debt. These treasury locks, are designated as cash flow hedges and the interest rate variation is recorded in the consolidated balance sheet as “cumulative other comprehensive income.”

At December 31, 2019, the Company had the following outstanding treasury locks agreements:


			Fair Value Liability		Fair Value Asset
	Notional		December 31,		December 31,
Maturity Date	Amount		2020		2020
2020	Ps.	10,365	Ps.	—	Ps.	102

21.8 Option embedded in the Promissory Note to fund the Vonpar’s acquisition

On December 6, 2016, as part of the purchase price paid for the Coca-Cola FEMSA’s acquisition of Vonpar, Spal issued and delivered a three-year promissory note to the sellers, for a total amount of 1,166 million Brazilian reais which was partially offset on November 14, 2018, as a result of the occurrence of certain contingencies for which the sellers agreed to indemnify Coca-Cola FEMSA. The promissory note bears interest at an annual rate of 0.375% and was denominated and payable in Brazilian reais,but linked to the performance of the exchange rate between the Brazilian real and the U.S. dollar. On December 6, 2019 the promissory note matured and was paid in full in cash for the outstanding amount of 1,002 million Brazilian reais, which was at the time equivalent to US $236 million (Ps. 4,670 million as of December 31, 2019).

21.9 Disposal of Estrella Azul

On September 30, 2020, Coca-Cola FEMSA announced that its joint venture with The Coca-Cola Company (Compañía Panameña de Bebidas, S.A.P.I. de C.V.) successfully sold 100% of its stock interest in Estrella Azul, a dairy products company in Panama. As part of the transaction, the company agreed with the buyer that we could receive payments in the future if the business of Estrella Azul achieves certain volume and EBITDA targets during the 2022-2027 period. The Company estimated the amount of the payments to be received based on the forecasts of the business (level 3 inputs) and calculated their net present value. As of December 31, 2020, the financial asset recognized in the consolidated statement of financial position has a total value of Ps. 8.

21.10 Net effects of expired contracts that met hedging criteria



	Impact in Consolidated
	Income Statement	2020		2019		2018
Cross currency swaps (1)	Interest expense	Ps.	(109)	Ps.	199	Ps.	157
Cross currency swaps (1)	Foreign exchange		1,212		480		642
Interest rate swaps	Interest expense		(163)		515		—
Forward agreements to purchase foreign currency	Foreign exchange		(167)		(116)		(87)
Commodity price contracts	Cost of goods sold		(129)		(391)		(258)
Options to purchase foreign currency	Cost of goods sold		8		(63)		(8)
Forward agreements to purchase foreign currency	Cost of goods sold		839		(163)		240
Treasury locks	Interest expense		153		—		—

(1)

This amount corresponds to the settlement of cross currency swaps portfolio in Brazil presented as part of the other financial activities.

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


	Impact in Consolidated
Derivative	Income Statement	2020		2019		2018
Forward agreements to purchase foreign currency	Market value gain (loss) on financial statements	Ps.	—	Ps.	4	Ps.	(12)
Cross currency swaps	Market value (loss) on financial statements		(212)		(293)		(116)

21.12 Net effect of expired contracts that did not meet the criteria for hedge accounting purposes


	Impact in Consolidated
Type of Derivatives	Income Statement	2020		2019		2018
Cross-currency swaps	Market value loss on financial instruments	Ps.	(212)	Ps.	(293)	Ps.	(186)
Embedded derivatives	Market value gain on financial instruments		—		4		—

21.13 Risk management

The Company has exposure to the following financial risks:

Market risk;

Interest rate risk;

Liquidity risk; and

Credit risk.

The Company determines the existence of an economic relationship between the hedging instruments and the hedged item based on the currency, amount and timing of their respective cash flows. The Company evaluates whether the derivative designated in each hedging relationship is expected to be effective and that it has been effective to offset changes in the cash flows of the hedged item using the hypothetical derivative method.

In these hedging relationships, the main sources of inefficiency are:

The effect of the credit risk of the counterparty and the Company on the fair value of foreign currency forward contracts; and

Changes in the periodicity of covered.

21.13.1 Market risk

Market risk is the risk that the fair value of future cash flow of a financial instrument will fluctuate because of changes in market prices. Market prices include currency risk and commodity price 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 based on a stress test of the exchange rates according to an annualized volatility estimated with historic prices obtained for the underlying asset over a period of time, in the cases of derivative financial instruments related to foreign currency risk, which the Company is exposed to as it relates to in its existing hedging strategy:


	Change in
Foreign Currency Risk	Exchange Rate	Effect on Equity
2020
FEMSA (1)	+19% MXN/EUR	Ps.	327
	‑19% MXN/EUR		(327)
	+21% BRL/USD		240
	‑21% BRL/USD		(240)
Coca-Cola FEMSA	+19% MXN/USD		884
	‑19% MXN/USD		(884)
	+21% BRL/USD		357
	‑21% BRL/USD		(357)
	+9% UYU/USD		21
	‑9% UYU/USD		(21)
	+16% COP/USD		142
	‑16% COP/USD		(142)
	+2% ARS/USD		2
	‑2% ARS/USD		(2)

2019
FEMSA (1)	+9% MXN/EUR	Ps.	57
	‑9% MXN/EUR		(57)
	+13% BRL/USD		202
	‑13% BRL/USD		(202)
Coca-Cola FEMSA	+9% MXN/USD		739
	‑9% MXN/USD		(739)
	+13% BRL/USD		155
	‑13% BRL/USD		(155)
	+5% UYU/USD		23
	‑5% UYU/USD		(23)
	+10% COP/USD		54
	‑10% COP/USD		(54)
	+25% ARS/USD		88
	‑25% ARS/USD		(88)

2018
FEMSA (1)	+12 MXN/EUR	Ps.	116
	‑12% MXN/EUR		(116)
Coca-Cola FEMSA	+13% MXN/USD		668
	‑13% MXN/USD		(668)
	+16% BRL/USD		413
	‑16% BRL/USD		(413)
	+8% UYU/USD		46
	‑8% UYU/USD		(46)
	+12% COP/USD		2
	‑12% COP/USD		(2)
	+27% ARS/USD		522
	‑27% ARS/USD		(522)

(1)

Does not include Coca-Cola FEMSA.


	Change in
Cross Currency Swaps (1) (2)	Exchange Rate	Effect on Equity		Effect on Profit or Loss
2020
FEMSA (3)	+13% CLP/USD	Ps.	—	Ps.	717
	‑13% CLP/USD		—		(717)
	+19% MXN/USD		—		6,381
	‑19% MXN/USD		—		(6,381)
	+16% COP/USD		—		426
	‑16% COP/USD		—		(426)
	+19% MXN/BRL		—		238
	‑19% MXN/BRL		—		(238)
Coca-Cola FEMSA	+19% MXN/USD		5,507		—
	‑19% MXN/USD		(5,507)		—
	+21% BRL/USD		2,161		—
	‑21% BRL/USD		(2,161)		—

2019
FEMSA (3)	+11% CLP/USD	Ps.	—	Ps.	546
	‑11% CLP/USD		—		(546)
	+9% MXN/USD		—		1,805
	‑9% MXN/USD		—		(1,805)
	+10% COP/USD		—		286
	‑10% COP/USD		—		(286)
	+13% MXN/BRL		—		177
	‑13% MXN/BRL		—		(177)
Coca-Cola FEMSA	+9% MXN/USD		2,315		—
	‑9% MXN/USD		(2,315)		—
	+13% BRL/USD		645		—
	‑13% BRL/USD		(645)		—

2018
FEMSA (3)	+10% CLP/USD	Ps.	—	Ps.	368
	‑10% CLP/USD		—		(368)
	+13% MXN/USD		—		2,706
	‑13% MXN/USD		—		(2,706)
	+12% COP/USD		—		283
	‑12% COP/USD		—		(283)
	+15% MXN/BRL		—		27
	‑15% MXN/BRL		—		(27)
Coca-Cola FEMSA	+13% MXN/USD		3,130		—
	‑13% MXN/USD		(3,130)		—
	+16% BRL/USD		9,068		—
	‑16% BRL/USD		(9,068)		—

(1)

The sensitivity analysis effects include all subsidiaries of the Company.

(2)

Includes the sensitivity analysis effects of all derivative financial instruments related to foreign exchange risk.

(3)

Does not include Coca-Cola FEMSA.


	Change in
Net Cash in Foreign Currency (1)	Exchange Rate	Effect on Profit or Loss
2020
FEMSA (2)	+18% EUR/ +19 % USD	Ps.	8,827
	‑18% EUR/ -19 % USD		(8,827)
Coca-Cola FEMSA	+18% USD		5,755
	‑18% USD		(5,755)

2019
FEMSA (2)	+9% EUR/ +9 % USD	Ps.	3,833
	‑9% EUR/ -9 % USD		(3,833)
Coca-Cola FEMSA	+8% USD		940
	‑8% USD		(940)

2018
FEMSA (2)	+12% EUR/ +13 % USD	Ps.	8,596
	‑12% EUR/ -13 % USD		(8,596)
Coca-Cola FEMSA	+13% USD		1,868
	‑13% USD		(1,868)

(1)

The sensitivity analysis effects include all subsidiaries of the Company.

(2)

Does not include Coca-Cola FEMSA.


	Change in
Commodity Price Contracts (1)	U.S.$ Rate		Effect on Equity
2020
Coca-Cola FEMSA	Sugar - 32	%	Ps.	(515)
	Aluminum - 16	%	Ps.	(289)

2019
Coca-Cola FEMSA	Sugar - 24	%	Ps.	(255)
	Aluminum - 15	%	Ps.	(1,164)

2018
Coca-Cola FEMSA	Sugar - 30	%	Ps.	(341)
	Aluminum - 22	%	Ps.	(55)

(1)

Effects on commodity price contracts are only in Coca-Cola FEMSA.

21.13.2 Interest rate risk

Interest rate risk is the risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in market interest rates.

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.

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 it considers in its existing hedging strategy:


	Change in
Interest Rate Swap (1)	Bps.	Effect on Equity
2020
FEMSA (2)	(100 Bps.)	Ps.	(354)

2019
FEMSA (2)	(100 Bps.)	Ps.	(432)
Coca-Cola FEMSA	(100 Bps.)		(37)

2018
FEMSA (2)	(100 Bps.)	Ps.	(359)
Coca-Cola FEMSA	(100 Bps.)		(1,976)

(1)

The sensitivity analysis effects include all subsidiaries of the Company.

(2)

Does not include Coca-Cola FEMSA.


Interest Effect of Unhedged Portion Bank Loans	2020		2019		2018
Change in interest rate		+100 Bps.		+100 Bps.		+100 Bps.
Effect on profit loss	Ps.	(110)	Ps.	(50)	Ps.	(145)

21.13.3 Liquidity risk

Each of the Company’s sub-holding companies generally finances its operational and capital requirements on an independent basis. As of December 31, 2020 and 2019, 50.2% and 64.3%, respectively of the Company’s outstanding consolidated total indebtedness was at the level of its sub-holding companies. This structure is attributable, in part, to the inclusion of third parties in the capital structure of Coca-Cola FEMSA. Currently, the Company’s management expects to continue financing its operations and capital requirements when it is considering domestic funding at the level of its sub-holding companies, otherwise; it is generally more convenient that its foreign operations would be financed directly through the Company because of more favourable terms of its financing market conditions. Nonetheless, sub-holdings companies may decide to incur indebtedness in the future to finance their own operations and capital requirements of the Company’s subsidiaries or significant acquisitions, investments or capital expenditures. As a holding company, the Company depends on dividends and other distributions from its subsidiaries to service the Company’s indebtedness.

The Company’s principal source of liquidity has generally been cash generated from its operations. The Company has traditionally been able to rely on cash generated from operations because a significant majority of the sales of Coca-Cola FEMSA and FEMSA Comercio – Proximity, FEMSA Comercio – Health and FEMSA Comercio – Fuel Divisions are on a cash or short-term credit basis, and FEMSA Comercio’s OXXO stores are able to finance a significant portion of their initial and ongoing inventories with supplier credit. The Company’s principal use of cash has generally been for capital expenditure programs, acquisitions, debt repayment and dividend payments.

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 management of the Company’s short-, medium- and long-term funding and liquidity requirements. The Company manages liquidity risk by maintaining adequate cash reserves and continuously monitoring forecast and actual cash flows, and with a low concentration of maturities per year.

The Company has access to credit from national and international banking institutions in order to meet treasury needs. 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 practicable to remit cash generated in local operations to fund cash 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 from another country. In the future the Company’s management may finance its 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 joint ventures or other transactions. We would expect to finance any significant future transactions with a combination of cash from operations, long-term indebtedness and capital stock.

The Company’s sub-holding companies generally incur short-term indebtedness in the event that they are temporarily unable to finance operations or meet any capital requirements with cash from operations. A significant decline in the business of any of the Company’s sub-holding companies may affect the sub-holding company’s ability to fund its capital requirements. A significant and prolonged deterioration in the economies in which we operate or in the Company’s businesses may affect the Company’s ability to obtain short-term and long-term credit or to refinance existing indebtedness on terms satisfactory to the Company’s management.

The Company presents the maturity dates associated with its long-term financial liabilities as of December 31, 2020, see Note 19. The Company generally makes payments associated with its long-term financial liabilities with cash generated from its operations.

The following table reflects all contractually fixed pay-offs for settlement, repayments and interest resulting from recognized financial liabilities. It includes expected net cash outflows from derivative financial liabilities that are in place as of December 31, 2020. 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, 2020.


											2026 and
	2021		2022		2023		2024		2025		thereafter
Non-derivative financial liabilities:
Notes and bonds	Ps.	5,646	Ps.	4,981	Ps.	45,553	Ps.	2,746	Ps.	4,306	Ps.	191,771
Loans from Banks		6,605		1,310		558		2,825		3,772		5,640
IFRS 16 lease obligation		89		53		38		31		24		—
Derivative financial liabilities		1,621		1,472		(3,700)		1,185		2,546		(10,457)

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

21.13.4 Credit risk

Credit risk refers to the risk that a 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 concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee.

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 Company’s maximum exposure to credit risk for the components of the statement of financial position at December 31, 2020 and 2019 is the carrying amounts, see Note 7.

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 in some cases a Credit Support Annex (“CSA”) that establishes margin requirements, which could change upon changes to the credit ratings given to the Company by independent rating agencies. As of December 31, 2020, 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.

21.14 Cash flows hedges

In these hedging relationships, the main sources of inefficiency are:

• The effect of the credit risk of the counterparty and the Company on the fair value of foreign currency forward contracts, which is not reflected in the change in the fair value of the hedged cash flows; and

• Changes in the period hedges.

As of December 31, 2020, the Company’s financial instruments used to hedge its exposure to foreign exchange rates and interest rates as follows:


	Maturity
	1‑6 months	6‑12 months	More than 12
Foreign exchange currency risk
Foreign exchange currency forward contracts
Net exposure	2,887	1,892	2
Average exchange rate MXN/USD	23.26	23.46	20.01
Net exposure	910	601	43
Average exchange rate BRL/USD	5.33	5.20	4.53
Net exposure	511	212	—
Average exchange rate COP/USD	3,750	3,740	—
Net exposure	96	—	—
Average exchange rate ARS/USD	92.97	—	—
Net exposure	225	58	—
Average exchange rate URY/USD	45.92	45.69	—
Foreign exchange currency swap contracts
Net exposure	—	—	44,107
Average exchange rate MXN/USD	—	—	14.70
Net exposure	58	—	9,652
Average exchange rate BRL/USD	5.15	—	4.00
Net exposure	—	71	981
Average exchange rate BRL/MXN	—	0.26	0.26
Net exposure	404	709	1,688
Average exchange rate COP/USD	3,454	2,992	3,296
Net exposure	—	3,333	1,519
Average exchange rate CLP/USD	—	696.02	677.00
Interest rate risk
Interest rate swaps
Net exposure	—	—	11,403
Interest rate average MXN	—	—	7.17	%
Net exposure	—	—	4,716
Interest rate average CLP	—	—	4.95	%
Commodities risk
Aluminum	325	370	99
Average price (USD/Ton)	1,654	1,720	1,740
Sugar	869	391	365
Average price (USD cent/Lb)	12.13	11.87	12.17
PX+MEG	364	364	—
Average price (USD /Ton)	730	730	—

As of December 31, 2019, the Company’s financial instruments used to hedge its exposure to foreign exchange rates and interest rates as follows:


	Maturity
	1‑6 months			6‑12 months			More than 12
Foreign exchange currency risk
Foreign exchange currency forward contracts
Net exposure	Ps.	4,373		Ps.	2,086		Ps.	—
Average exchange rate MXN/USD		20.00			20.20			—
Net exposure		746			378			267
Average exchange rate BRL/USD		4.05			4.19			4.44
Net exposure		220			85			—
Average exchange rate COP/USD		3,491			3,460			—
Net exposure		137			—			—
Average exchange rate ARS/USD		79.23			—			—
Net exposure		335			87			—
Average exchange rate URY/USD		37.55			40.03			—
Foreign exchange currency option contracts
Net exposure		107			—			—
Average exchange rate COP/USD		3,252			—			—
Foreign exchange currency swap contracts
Net exposure		9,423			—			18,428
Average exchange rate MXN/USD		19.54			—			15.93
Net exposure		—			4,365			9,140
Average exchange rate BRL/USD		—			3.41			4.00
Net exposure		—			84			1,195
Average exchange rate BRL/MXN		—			0.21			0.21
Net exposure		—			—			2,403
Average exchange rate COP/USD		—			—			3,075
Net exposure		—			3,007			1,371
Average exchange rate CLP/USD		—			696.02			677.00
Interest rate risk
Interest rate swaps
Net exposure		—			4,365			—
Interest rate average BRL		—			8.34	%		—	%
Net exposure		—			—			11,403
Interest rate average MXN		—			—			7.17	%
Net exposure		—			—			2,197
Interest rate average CLP		—	%		—			6.26	%
Commodities risk
Aluminum		276			118			—
Average price (USD/Ton)		1,796			1,812			—
Sugar		1,192			361			98
Average price (USD cent/Lb)		13.09			12.73			13.45
PX+MEG		160			160			—
Average price (USD /Ton)		848			848			—

As of December 31, 2020 and 2019, the Company does not have any cash flows hedge exposures.

As of December 31, 2020, a reconciliation per category of equity components and an analysis of OCI components, net of tax; generated by the cash flow hedges were as follows:



	Hedging		Costs of hedging
	reserve		reserve
Balances at beginning of the period	Ps.	431	Ps.	—
Cash flows hedges
Fair value changes:
Foreign exchange currency risk – Purchase of stock		82		—
Foreign exchange currency risk – Other stock		(626)		—
Interest rate risk		2,991		—
The amounts included in non-financial costs:
Taxes due to changes in reserves during the period		12		—
Balances at the end of the period	Ps.	2,890	Ps.	—

Impact of hedging on equity

Set out below is the reconciliation of each component of equity and the analysis of other comprehensive income:


	Foreign
	exchange		Foreign		Cross-currency		Interest		Treasury		Commodity		Total holders		Non-controlling
	forward contracts		currency option		swaps		rate swaps		Lock contracts		price contracts		of the parent		interest		Total
As at January 1, 2019	Ps.	53	Ps.	17	Ps.	1,296	Ps.	351	Ps.	—	Ps.	(136)	Ps.	1,065	Ps.	(120)	Ps.	945
Financial instruments – purchases		(244)		2		78		—		102		29		(33)		(71)		(104)
Change in fair value of financial instruments recognized in OCI		—		—		(77)		(416)		—		3		(490)		(1,101)		(1,591)
Amount reclassified from OCI to profit or loss		(68)		(26)		451		36		—		198		591		631		1,222
Foreign currency revaluation of the net foreign operations		—		—		(176)		—		—		—		(176)		(93)		(269)
Effects of changes in foreign exchange rates		—		—		30		9		—		3		42		22		64
Tax effect		103		7		—				(31)		(74)		(465)		195		(270)
As at December 31, 2019	Ps.	(156)	Ps.	—	Ps.	1,602	Ps.	(20)	Ps.	71	Ps.	23	Ps.	534	Ps.	(537)	Ps.	(3)
Financial instruments – purchases		(840)		2		(2,145)		—		—		351		(2,632)		(170)		(2,803)
Change in fair value of financial instruments recognized in OCI		(483)		—		6,922		(762)		—		9		5,686		1,425		7,387
Amount reclassified from OCI to profit or loss		277		(2)		2,461		129		(102)		(37)		2,726		943		3,670
Foreign currency revaluation of the net foreign operations		—		—		(3,588)		—		—		—		(3,588)		(1,893)		(3,588)
Effects of changes in foreign exchange rates		7		—		92		14		—		(8)		105		55		(1,846)
Tax effect		163		—		—				31		(108)		(977)		(106)		(1,246)
As at December 31, 2020	Ps.	(1,032)	Ps.	—	Ps.	5,344	Ps.	(639)	Ps.	—	Ps.	230	Ps.	1,854	Ps.	(283)	Ps.	1,571

Non-Controlling Interest in Consolidated Subsidiaries

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Non-ControllingInterest in Consolidated Subsidiaries

Note 22. Non-Controlling Interest in Consolidated Subsidiaries

An analysis of FEMSA’s non-controlling interest in its consolidated subsidiaries as of December 31, 2020 and 2019 is as follows:


	December 31,		December 31,
	2020		2019
Coca-Cola FEMSA	Ps.	66,800	Ps.	72,649
Other		2,644		1,113
	Ps.	69,444	Ps.	73,762

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


	2020		2019		2018
Balance at beginning of the period	Ps.	73,762	Ps.	78,489	Ps.	86,621
Net income of non-controlling interest		5,686		7,349		9,089
Other comprehensive income (loss):		(5,793)		(4,552)		(4,080)
Exchange differences on translation of foreign operation		(5,958)		(3,833)		(4,016)
Remeasurements of the net defined benefits liability		(169)		(271)		155
Valuation of the effective portion of derivative financial instruments		334		(448)		(219)
Dividends		(5,524)		(3,945)		(3,713)
Share based payment		(64)		(12)		31
Acquisition of Socofar non-controlling interest		—		(3,530)		—
Acquisition of Synergy non-controlling interest (see Note 4.1)		1,298		—		—
Other acquisitions and remeasurements		79		32		413
(Derecognition) from non-controlling interest		—		—		(11,140)
Accounting standard adoption effects (“IFRIC 23 and IFRS 9”)		—		(69)		(150)
Adoption of IAS 29 for Argentina		—		—		1,418
Balance at end of the period	Ps.	69,444	Ps.	73,762	Ps.	78,489

Non-controlling interest’s accumulated other comprehensive income is comprised as follows:



	December 31,		December 31,
	2020		2019
Exchange differences on translation foreign operation	Ps.	(6,657)	Ps.	(699)
Remeasurements of the net defined benefits liability		(559)		(390)
Valuation of the effective portion of derivative financial instruments		(277)		(611)
Accumulated other comprehensive income	Ps.	(7,493)	Ps.	(1,700)

Coca-Cola FEMSA shareholders, especially the Coca-Cola Company which hold Series D shares, have some protective rights about investing in or disposing of significant businesses. However, these rights do not limit the continued normal operations of Coca-Cola FEMSA.

Summarized financial information in respect of Coca-Cola FEMSA is set out below:


	December 31,		December 31,
	2020		2019
Total current assets	Ps.	72,440	Ps.	56,796
Total non-current assets		190,626		201,043
Total current liabilities		42,845		51,010
Total non-current liabilities		97,764		77,144
Total revenue	Ps.	183,615	Ps.	194,471
Consolidated net (loss) income for continuing operations		10,368		12,630
Consolidated comprehensive income for continuing operations	Ps.	3,050	Ps.	5,489
Net cash flow generated from operating activities for continuing operations		35,147		31,289
Net cash flow used in investing activities for continuing operations		(10,508)		(10,744)
Net cash flow used in financing activities for continuing operations		417		(22,794)

22.1 Options embedded from past acquisitions

FEMSA Comercio – Health Division entered into option transactions regarding the remaining 40% non-controlling interest not held by FEMSA Comercio – Health Division.

On December 13, 2019, the former controlling shareholders of Socofar exercised their put option to sell the remaining 40% non-controlling interest to FEMSA Comercio – Health Division at the fair value of the interest. As of December 31, 2019 the Company recognized a loss in the consolidated statements of changes in equity and Socofar has been included 100% in the consolidated statements of financial position.

The former controlling shareholders of Open Market retain a put for their remaining 20% non-controlling interest that can be exercised (i) at any time after the acquisition date upon the occurrence of certain events and (ii) annually from January through April, after the third anniversary of the acquisition date. In any event, the Company through one of its subsidiaries can call the remaining 20% non-controlling interest annually from January through April, after the fifth anniversary of the acquisition date. Both options would be exercisable at the then fair value of the interest and shall remain indefinitely.

Equity

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Equity

Note 23. Equity

23.1 Equity accounts

The capital stock of FEMSA is comprised of 2,161,177,770 BD units and 1,417,048,500 B units. As of December 31, 2020 and 2019, the common stock of FEMSA was comprised of 17,891,131,350 common shares, without par value and with no foreign ownership restrictions. Fixed capital stock amounts to Ps. 300 (nominal value) and the variable capital may not exceed 10 times the minimum fixed capital stock amount.

The characteristics of the common shares are as follows:

Series “B” shares, with unlimited voting rights, which at all times must represent a minimum of 51% of total capital stock;

Series “L” shares, with limited voting rights, which may represent up to 25% of total capital stock; and

Series “D” shares, with limited voting rights, which individually or jointly with series “L” shares may represent up to 49% of total capital stock.

The Series “D” shares are comprised as follows:

Subseries “D-L” shares may represent up to 25% of the series “D” shares;

Subseries “D-B” shares may comprise the remainder of outstanding series “D” shares; and

The non-cumulative premium dividend to be paid to series “D” shareholders will be 125% of any dividend paid to series “B” shareholders.

The Series “B” and “D” shares are linked together in related units as follows:

“B units” each of which represents five series “B” shares, and which are traded on the BMV; and

“BD units” each of which represents one series “B” share, two subseries “D-B” shares and two subseries “D-L” shares, and which are traded both on the BMV and the NYSE.

As of December 31, 2020 and 2019, FEMSA’s capital stock is comprised as follows:


	“B” Units	“BD” Units	Total
Units	1,417,048,500	2,161,177,770	3,578,226,270
Shares:
Series “B”	7,085,242,500	2,161,177,770	9,246,420,270
Series “D”	—	8,644,711,080	8,644,711,080
Subseries “D-B”	—	4,322,355,540	4,322,355,540
Subseries “D-L”	—	4,322,355,540	4,322,355,540
Total shares	7,085,242,500	10,805,888,850	17,891,131,350

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 common stock at nominal value. This reserve may not be distributed to shareholders during the existence of the Company, except as a stock dividend. As of December 31, 2020 and 2019, this reserve amounted to Ps. 596.

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 when capital reductions come from restated shareholder contributions (“CUCA”) and when the distributions of dividends come from net 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. A new Income Tax Law (“LISR”) went into effect on January 1, 2014; such law no longer includes the tax consolidation regime which allowed calculating the CUFIN on a consolidated basis; therefore, beginning in 2014, distributed dividends must be taken from the individual CUFIN balance of FEMSA, which can be increased with the subsidiary companies’ individual CUFINES through the transfers of dividends. The sum of the individual CUFIN balances of FEMSA and its subsidiaries as of December 31, 2020 amounted to Ps. 237,627. Dividends distributed to its stockholders who are individuals and foreign residents must withhold 10% for LISR purposes, which will be paid in Mexico. The foregoing will not be applicable when distributed dividends arise from the accumulated CUFIN balances as of December 31, 2013.

At an ordinary shareholders’ meeting of FEMSA held on March 16, 2018, the shareholders approved a dividend of Ps. 9,220 that was paid 50% on May 4, 2018 and the other 50% on November 6, 2018; and a reserve for share repurchase of a maximum of Ps. 7,000. As of December 31, 2018, the Company has not repurchased shares. Treasury shares resulted from share-based payment bonus plan are disclosed in Note 18.

At an ordinary shareholders’ meeting of Coca-Cola FEMSA held on March 9, 2018, the shareholders approved a dividend of Ps. 7,038 that was paid 50% on May 3, 2018 and other 50% on November 1, 2018. The corresponding payment to the non-controlling interest was Ps. 3,713.

At an ordinary shareholders’ meeting of FEMSA held on March 22, 2019, the shareholders approved a dividend of Ps 9,692 that was paid 50% on May 7, 2019 and other 50% on November 5, 2019; and a reserve for share repurchase of a maximum of Ps. 7,000. As of December 31, 2019, the Company has not repurchased shares. Treasury shares resulted from share-based payment bonus plan are disclosed in Note 18.

At an ordinary shareholders’ meeting of Coca-Cola FEMSA held on March 14, 2019, the shareholders approved a dividend of Ps. 7,437 that was paid 50% on May 3, 2019 and other 50% on November 1, 2019. The corresponding payment to the non-controlling interest was Ps. 3,925.

At an ordinary shareholders’ meeting of FEMSA held on March 20, 2020, the shareholders approved a dividend of Ps. 10,360 that was paid 50% on August 20, 2020 and other 50% on November 5, 2020; and a reserve for share repurchase of a maximum of Ps. 17,000. As of December 31, 2020, the Company has not repurchased shares. Treasury shares resulted from share-based payment bonus plan are disclosed in Note 18.

At an ordinary shareholders’ meeting of Coca-Cola FEMSA held on March 17, 2020, the shareholders approved a dividend of Ps. 10,210 that was paid 50% on May 5, 2020 and other 50% on November 3, 2020. The corresponding payment to the non-controlling interest was Ps. 5,389.

For the years ended December 31, 2020, 2019 and 2018 the dividends declared and paid by the Company and Coca-Cola FEMSA were as follows:


	2020		2019		2018
FEMSA	Ps.	10,360	Ps.	9,692	Ps.	9,220
Coca-Cola FEMSA (100% of dividend)		10,210		7,437		7,038

For the years ended December 31, 2020 and 2019 the dividends declared and paid per share by the Company are as follows:


Series of Shares	2020		2019		2018
“B”	Ps.	0.51667	Ps.	0.48333	Ps.	0.45980
“D”		0.64583		0.60417		0.57480

23.2 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, 2020 and 2019.

The Company is not subject to any externally imposed capital requirements, other than the legal reserve (see Note 23.1) and debt covenants (see Note 19).

The Company's Finance, Planning and the Corporate Practices Committees 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 national and international, currently rated AAA and A- respectively, which requires it to have a debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio lower than 1.5. 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 credit rating.

Earnings per Share

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Earnings per Share

Note 24. Earnings per Share

Basic earnings per share amounts are calculated by dividing consolidated net income for the year 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 period.

Diluted earnings per share amounts are calculated by dividing consolidated net income for the year attributable to controlling interest by the weighted average number of shares outstanding during the period adjusted for the effects of dilutive potential shares (originated by the Company’s share-based payment program).


	2020						2019							2018
	Per Series			Per Series			Per Series			Per Series			Per Series			Per Series
	“B” Shares			“D” Shares			“B” Shares			“D” Shares			“B” Shares			“D” Shares
(in millions of shares)
Weighted average number of shares for basic earnings per share		9,243.59			8,633.38			9,244.16			8,635.65			9,243.81			8,634.26
Effect of dilution associated with non-vested shares for share based payment plans		2.83			11.33			2.26			9.06			2.61			10.45
Weighted average number of shares adjusted for the effect of dilution (Shares outstanding)		9,246.42			8,644.71			9,246.42			8,644.71			9,246.42			8,644.71
Dividend rights per series		100	%		125	%		100	%		125	%		100	%		125	%
(see Note 23.1)
Weighted average number of shares further adjusted to reflect dividend rights		9,246.42			10,805.89			9,246.42			10,805.89			9,246.42			10,805.89
Basic earnings per share from continuing operations		(0.10)			(0.12)			1.03			1.29			1.13			1.41
Basic earnings per share from discontinued operations		—			—			—			—			0.07			0.09
Diluted earnings per share from continuing operations		(0.10)			(0.12)			1.03			1.29			1.13			1.41
Diluted earnings per share from discontinued operations		—			—			—			—			0.07			0.09
Allocation of earnings, weighted		46.11	%		53.89	%		46.11	%		53.89	%		46.11	%		53.89	%
Net controlling interest income allocated from continuing operations	Ps.	(890)		Ps.	(1,040)		Ps.	9,545		Ps.	11,154		Ps.	10,403		Ps.	12,157
Net controlling interest income allocated from discontinued operations	Ps.	—		Ps.	—		Ps.	—		Ps.	—		Ps.	660		Ps.	770

Taxes

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Income Taxes

Note 25. Taxes

25.1 Recoverable taxes

Recoverable taxes are mainly the result of higher provisional payments of income tax during 2020 in comparison to current year provision, which will be compensated in future years. The operations in Guatemala, Panama, Nicaragua and Colombia are subject to a minimum tax. In Guatemala and Colombia this tax is recoverable under certain circumstances only. Guatemala tax basis is determined considering the highest between total assets and net income; in Colombia tax basis is equity.

25.1.1 Exclusion of the State VAT (ICMS) on the federal sale taxes (PIS / COFINS) calculate basis

On March 15, 2017 the Brazilian Federal Supreme Court (STF) ruled that the inclusion of the VAT (ICMS) on federal sales taxes (PIS and COFINS) taxable basis is unconstitutional. During 2019, our companies in Brazil obtained conclusive favorable motions over this exclusion of VAT (ICMS) over PIS / COFINS calculation. The net favorable effects of each case are to be recorded at the time all formalities and legal procedures are finalized and recovery of the taxes paid becomes virtually certain. During 2020 and 2019, it was concluded the administrative formalities for one of the motions and the recoverable taxes for this motion were recorded in the income statement.

As of December 31, 2020 and 2019 the amount of recoverable taxes in Brazil including PIS and COFINS is Ps. 2,523 and Ps. 4,223.

25.2 Tax Reforms

Chile

In 2020 Corporate Income Tax rate in Chile remains 27%. The Chilean tax authority included an instant depreciation regime of 50% for acquisition of new assets acquired between January 1st, 2019 and December 31st, 2021, with the possibility to apply accelerated depreciation to the 50% residual basis.

Mexico

On January 1, 2020, a new tax regime in Mexico was effective regarding foreign transparent vehicles and changes were made to the preferential tax regime. As a result of such changes, the dividends from Heineken Group are subject to a 30% income tax in Mexico when received.

Starting January 1, 2020, the excise tax increased from 5.0% to 7.0% to carbonated beverages added with sugar or any caloric sweetener. Drinkable foods based on dairy products, grains or cereals, nectars, fruit juices and vegetables with natural fruit concentrates are exempt from this tax.

In addition to the above, on October 30, 2019, Mexico approved a new Tax Reform, which was effective on January 1, 2020.

The most relevant changes are: (i) Taxpayers has been limited to a net interest deduction equal to 30% of the entity’s Adjusted Taxable Income (ATI). ATI is determined similarly to EBITDA (earnings before interest, taxes, depreciation and amortization). A $20,000,000 pesos (approximately USD 1M) exception applies for deductible interest at a Mexican group level. The non-deductible interests that exceed the limitation could be carried forward for the subsequent 10 tax years; (ii) The reform modifies the excise tax (IEPS) of 1.17 pesos to 1.2616 per liter on the production, sale and import of beverages with added sugar and HFCS (High-fructose corn syrup) for flavored beverages and starting January 1, 2021, this tax is subject to an annual increase based on the inflation of the previous year; (iii) The excise tax of 25% on energized beverages is applicable whenever the beverages include a mixture of caffeine with any other stimulating effects substances; (iv) Federal Fiscal Code (FFC) was modified to attribute joint liability to partners, shareholders, directors, managers or any other responsible of the management of the business; (v) added a disclosure obligation of certain reportable transactions to tax authorities; and (vi) increased the tax authorities’ discretion to limit tax benefits or attributes in situations where authorities understand there is a lack of business reason and no economic benefit obtained, other than the tax benefit.

On January 1, 2019, the Mexican government eliminated the right to offset any tax credit against any payable tax (general offset or compensación universal). As of such date, the right to offset any tax credit is against taxes of the same nature and payable by the same person (not being able to offset tax credits against taxes payable by third parties). Additionally, by Executive Decree, certain tax benefits related to the value-added tax and income tax were provided to businesses located in the northern border of Mexico. Due to the territories where we operate, this last provision is not applicable to our business.

Colombia

On January 1, 2019, a new tax reform became effective in Colombia. This reform reduced the income tax rate from 33.0% for 2019 to 32.0% for 2020, to 31.0% for 2021 and to 30.0% for 2022. The minimum assumed income tax (renta presuntiva sobre el patrimonio) was also reduced from 3.5% for 2018 to 1.5% for 2019 and 2020, and to 0.0% for 2021. In addition, the thin capitalization ratio was adjusted from 3:1 to 2:1, and was modified to apply only to transactions between related parties. Commencing on January 1, 2019, value-added tax, which was applied only to the first sale in the supply chain prior to December 31, 2018, began to be applied and transferred throughout the entire supply chain, which in our case results in charging value-added tax on the sales price of our finished goods (applicable to our Colombian subsidiary located in the free trade zone). For companies located in free trade zones, the value-added tax is charged on the cost of imported raw materials of national and foreign origin, which we are able to credit against the value-added tax on the sales price of our products. The municipality sales tax is 50.0% deductible against payable income tax for 2019 and will be 100.0% deductible in 2020. Finally, the value-added tax paid on acquired fixed assets will be credited against income tax or the minimum assumed income tax. Additionally, this tax reform increased the tax rate on dividends paid to foreign individuals and non-resident entities from 5.0% to 7.5%. The tax reform also imposed a tax rate of 7.5% on dividends paid to Colombian companies. This tax is charged only on the first distribution of dividends from one Colombian corporate entity to another, and a credit resulting from the tax withholding is carried forward until a Colombian company makes a distribution to a shareholder that is an individual residing in Colombia or a non-resident individual or entity.

In October 2019, the Colombian courts declared the tax reform that became effective on January 1, 2019 unconstitutional. On December 27, 2019, the Colombian government enacted a new tax reform, which became effective on January 1, 2020. In general, the reform maintained the provisions introduced on the previous tax reform and included some additional changes, as follows: (i) the minimum assumed income tax rate (renta presuntiva sobre el patrimonio) was reduced from 1.5% to 0.5% for 2020 and reduced to 0.0% for the year 2021 and beyond; (ii). the tax rate on dividends paid to Colombian resident individuals was reduced from 15.0% to 10.0%; (iii) the tax rate on dividends paid to foreign individuals and non-resident entities was increased from 7.5% to 10.0%; (iv) the possibility to deduct 100% of the municipality sales tax against payable income tax was postponed to 2022; and (v) taxpayers were granted more flexibility to credit or recover the value-added tax of imported goods from free trade zones.

Costa Rica

On July 1, 2019, a tax reform became effective in Costa Rica. This reform allowed tax credits on sales taxes to be recorded on goods, administrative services and general expenses. The value-added tax rate of 13.0% on services provided within Costa Rica now applies to both domestic and foreign service providers. Capital gains taxes are now imposed at a rate of 15.0% on sales of assets located in Costa Rica. New income tax withholding rates are now imposed on salaries and other employee benefits at the rates of 25.0% and 20.0%, depending on the salary bracket. Finally, a new thin capitalization rule provides that interest expenses paid to entities other than members of the Costa Rican financial system that exceed 20.0% of a company’s EBITDA are not deductible for income tax purposes.

Panama

Until November 17, 2019, Panama imposed an excise tax of 5.0% on carbonated beverages and imported non-carbonated beverages and a 10.0% selective consumption tax on syrups, powders and concentrate used to produce sugary drinks. On November 18, 2019, Panama replaced such excise tax with an excise tax of 7.0% on carbonated beverages with more than 7.5 grams of sugar or any caloric sweetener per 100 ml, and a 10.0% tax on syrups, powders and concentrate used to produce sugary drinks. As of January 1, 2020, Panama imposes an excise tax of 5.0% on non-carbonated beverages with more than 7.5 grams of sugar or any caloric sweetener per 100 ml, whether imported or produced locally. Beverages derived from dairy products, grains or cereals, nectars, fruit juices and vegetables with natural fruit concentrates are exempt from this tax.

Nicaragua

On March 1, 2019, a tax reform became effective in Nicaragua, increasing the excise tax for all beverages (except for water) from 9.0% to 11.0%; to 13.0% on January 1, 2020; and to 15.0% starting on January 1, 2021. Besides, starting on March 1, 2019, the minimum alternative income tax increased from 1.0% to 3.0%.

Uruguay

On December 29, 2020, the Uruguayan government issued an executive decree reforming the determination of the excise tax credit of $1.15 per sold liter on returnable bottles. Starting on January 1, 2021 to June 30, 2021, the tax credit must be determined considering the relation between the purchases of returnable bottles of Uruguayan origin with the total purchases of returnable bottles, using the figures of the last three years. For the second half of 2021, it is expected that the government will issue another decree with the corresponding provisions to apply the tax credit.

Brazil

The Brazilian federal production tax rates and federal sales tax rates increased in 2017 and 2018 and remained flat in 2019 and 2020. In early 2017, the Supreme Court decided that the value-added tax would not be used as the basis for calculating the federal sales tax, resulting in a reduction of the federal sales tax. The Brazilian tax authorities have appealed the Supreme Court’s decision and such appeal is in process. However, our Brazilian subsidiaries commenced legal proceedings to ascertain their ability to calculate federal sales tax without using the value-added tax as a basis, in accordance with the Supreme Court’s ruling, and obtained a final favorable resolution in 2019. In 2020, the federal production and sales taxes together resulted in an average of 15.9% tax over net sales.

In recent years, the excise tax rate on concentrate in Brazil has undergone recurrent temporary fluctuations. The excise tax rate was reduced from 20.0% to 4.0% from September 1, 2018 to December 31, 2018, was increased from 4.0% to 12.0% from January 1, 2019 to June 30, 2019, was reduced to 8.0% from July 1, 2019 to September 30, 2019 and was increased to 10.0% from October 1, 2019 to December 31, 2019. The excise tax rate was reduced to 4.0% from January 1, 2020 to May 31, 2020, was increased to 8.0% from June 1, 2020 to November 30, 2020 and was reduced again to 4.0% on December 1, 2020 till January 31, 2021 and it was increased to 8% from February 1, 2021 onward.

Argentina

Beginning on January 1, 2021, taxpayers may adjust inflationary effects for income tax purposes in one sole year instead of through a period of six years.

On December 23, 2019, Argentina enacted a new tax reform that became effective as of January 1, 2020. This reform maintained the income tax at a rate of 30.0% and the withholding tax on dividends paid to non-resident stockholders and resident individuals at a rate of 7.0% for two more years.

On January 1, 2018, a tax reform became effective in Argentina. This reform reduced the income tax rate from 35.0% to 30.0% for 2018 and 2019, and then to 25.0% for the following years. In addition, such reform imposed a new tax on dividends paid to non-resident stockholders and resident individuals at a rate of 7.0% for 2018 and 2019, and then to 13.0% for the following years. The tax reform decreased the sales tax rate in the province of Buenos Aires from 1.75% to 1.5% in 2018.

However, the reform increased the sales tax rate in the City of Buenos Aires from 1.0% to 2.0% in 2018, and scheduled a reduction to 1.5% in 2019, to 1.0% in 2020, to 0.5% in 2021 and to 0.0% in 2022. Nonetheless, the Argentine government issued an executive decree with an order to maintain the sales taxes rate in the City of Buenos Aires at a rate of 1.5% through 2020, without ruling on whether the scheduled reductions for 2021 and 2022 will occur. On December 11, 2020, Argentine government signed a new commitment to suspend the reduction of sales taxes rate until December 31, 2021. The rate for both Buenos Aires City and Buenos Aires province will remain at 1.5%.

25.3 Income Tax

The major components of income tax expense for the years ended December 31, 2020, 2019 and 2018 are:


	2020		2019		2018
Current tax expense	Ps.	18,690	Ps.	11,652	Ps.	10,480
Deferred tax expense (income):
Origination and reversal of temporary differences		(5,824)		127		491
Utilization (recognition) of tax losses, net		1,994		(1,201)		(927)
Change in the statutory rate		(41)		(102)		125
Total deferred tax income expense		(3,871)		(1,176)		(311)
Total income taxes	Ps.	14,819	Ps.	10,476	Ps.	10,169

On May 29, 2020, the Company reached an agreement with the Mexican tax authority (the Servicio de Administración Tributaria), to resolve interpretative differences over taxes paid outside of Mexico, without judicial action. Under the agreed terms, the Company recognized the tax position as a liability in the statement of financial position and recognized a provision in the income statement of approximately Ps. 8,754 million during the second quarter of 2020. From this amount Ps. 5,500 million were recorded and presented as current tax expense, and Ps. 3,253 million as penalties, from which Ps. 868 million correspond to inflationary effects. The total liability was fully paid during the second and third quarter of 2020.

Recognized in Consolidated Statement of Other Comprehensive Income (“OCI”)


Income tax related to items charged or
recognized directly in OCI during the period:	2020		2019		2018
Unrealized gain (loss) on cash flow hedges	Ps.	871	Ps.	(391)	Ps.	(293)
Exchange differences on translation of foreign operations		4,758		(1,667)		(2,647)
Remeasurements of the net defined benefit liability		(208)		(371)		287
Share of the other comprehensive income of equity accounted investees		(2,597)		288		989
Total income tax benefit recognized in OCI	Ps.	2,824	Ps.	(2,141)	Ps.	(1,664)

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, 2020, 2019 and 2018 is as follows:


	2020		2019		2018

Mexican statutory income tax rate	30.0	%	30.0	%	30.0	%
Difference between book and tax inflationary values and translation effects	(5.1)	%	(2.2)	%	(4.0)	%
Annual inflation tax adjustment	3.0	%	0.2	%	(1.2)	%
Difference between statutory income tax rates	1.0	%	0.9	%	1.8	%
Non-deductible expenses	3.8	%	4.5	%	3.2	%
Taxable (non-taxable) income	2.9	%	(1.0)	%	(0.5)	%
Effect of changes in Argentina tax law	0.1	%	(0.3)	%	(0.9)	%
Others	(1.9)	%	(0.7)	%	0.9	%
Impairments (1)	4.6	%	0.9	%	0.4	%
Adjustments for previous tax years (2)	30.3	%	—	%	—	%
Income tax credit	(8.3)	%	—	%	—	%
Tax Loss (3)	16.3	%	0.1	%	0.5	%
Consolidated Effective income tax rate (4)	76.7	%	32.4	%	30.2	%

(1)

Includes the impairments of Specialty's and Estrella Azul explained in Note 13 and 10, respectively.

(2)

Related to an agreement with the Mexican tax authority, to resolve interpretative differences over foreign (non-Mexican) dividends received before 2020.

(3)

Includes the adjustments in tax losses recognized during 2020 in Coca-Cola FEMSA.

(4)

The effective income tax rate without the extraordinary effects occurred during 2020 is 33.8%.

Deferred Income Tax Related to:


	Consolidated Statement				Consolidated Statement
	of Financial Position as of				of Income
	December 31, 2020		December 31, 2019		2020		2019			2018
Allowance for doubtful accounts	Ps.	(501)	Ps.	(437)	Ps.	(25)	Ps.	(43)	Ps.	93
Inventories		(757)		76		60		(6)		(27)
Other current assets		122		256		(163)		182		(31)
Property, plant and equipment, net		(4,999)		(4,068)		(708)		(320)		(851)
Investments in equity accounted investees		(9,321)		(5,482)		(15)		7		40
Other assets		(681)		137		(729)		59		(82)
Finite useful lived intangible assets		(181)		(111)		129		(345)		627
Indefinite lived intangible assets		9,316		10,788		(261)		1,220		758
Post-employment and other long-term employee benefits		(1,124)		(1,067)		(37)		(2)		(148)
Derivative financial instruments		(121)		(9)		(114)		(31)		(63)
Provisions		1,135		(1,216)		142		1,359		1,122
Temporary non-deductible provision		(4,907)		(3,183)		(1,893)		(1,797)		(293)
Employee profit sharing payable		(371)		(430)		64		8		(27)
Tax loss carryforwards		(8,422)		(10,309)		1,994		(1,201)		(927)
Tax credits to recover (2)		(2,595)		(1,855)		(1,629)		(122)		(109)
Other comprehensive income (1)		32		(596)		86		29		(54)
Exchange differences on translation of foreign operations in OCI		7,697		3,959		—		—		—
Other liabilities		717		533		(440)		(3)		(324)
Right of use from leases, net		(1,049)		(561)		(532)		(577)		—
Deferred tax income					Ps.	(4,071)	Ps.	(1,583)	Ps.	(296)
Deferred tax income net recorded in share of the profit of equity accounted investees						200		407		(15)
Deferred tax income, net					Ps.	(3,871)	Ps.	(1,176)	Ps.	(311)
Deferred income taxes, net		(16,010)		(13,575)
Deferred tax asset		(22,043)		(20,521)
Deferred tax liability	Ps.	6,033	Ps.	6,946

(1)

Deferred tax related to derivative financial instruments and remeasurements of the net defined benefit liability.

(2)

Corresponds to income tax credits arising from dividends received from foreign subsidiaries to be recovered within the next ten years accordingly to the Mexican Income Tax law as well as effects of the exchange of foreign currencies with a related and non-related parties.

Deferred tax related to Accumulated Other Comprehensive Income (“AOCI”)


Income tax related to items charged or
recognized directly in AOCI as of the year:	2020		2019
Unrealized loss on derivative financial instruments	Ps.	795	Ps.	(36)
Remeasurements of the net defined benefit liability		(762)		(560)
Total deferred tax loss related to AOCI	Ps.	33	Ps.	(596)

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


	2020		2019		2018
Balance at the beginning of the period	Ps.	(13,575)	Ps.	(10,657)	Ps.	(9,720)
Deferred tax provision for the period		(3,871)		(1,176)		(311)
Deferred tax income net recorded in share of the profit of equity accounted investees		(404)		(406)		165
Acquisition of subsidiaries		—		(382)		(316)
Effects in equity:
Unrealized (gain) on cash flow hedges		865		(391)		(445)
Exchange differences on translation of foreign operations		2,215		(2,121)		(1,762)
Remeasurements of the net defined benefit liability		(256)		(204)		543
Retained earnings of equity accounted investees		(32)		384		54
Cash flow hedges in foreign investments		(1,020)		425		310
Restatement effect of the period and beginning balances associated with hyperinflationary economies		68		953		438
Disposal of subsidiaries		—		—		387
Balance at the end of the period	Ps.	(16,010)	Ps.	(13,575)	Ps.	(10,657)

The Company offsets tax assets and liabilities 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 are levied by the same tax authority.

Tax Loss Carryforwards

The subsidiaries in Mexico, Colombia, Uruguay, Argentina and Brazil have tax loss carryforwards. Unused tax loss carryforwards, for which a deferred income tax asset has been recognized, may be recovered provided certain requirements are fulfilled. The tax losses carryforwards for which a deferred tax asset has been recorded and their corresponding years of expiration are as follows:


	Tax Loss
Year	Carryforwards
2021	Ps.	35
2022		50
2023		26
2024		69
2025		872
2026		1,884
2027		52
2028		2,683
2029		3,535
2030 and thereafter		2,303
No expiration (Brazil and Colombia)		15,109
	Ps.	26,618

Considering all available evidence, including forecasts, business plans and strategic measures, the Company has decided to make an adjustment in its deferred income tax asset as of December 31, 2020 for an amount of Ps 3,847.

The Company recorded certain goodwill balances due to acquisitions that are deductible for Brazilian income tax reporting purposes. The deduction of such goodwill amortization has resulted in the creation of NOLs in Brazil which have no expiration, but their usage is limited to 30% of Brazilian taxable income in any given year. As of December 31, 2020, the Company believes that it is more likely than not that it will ultimately recover such NOLs through the reversal of temporary differences and future taxable income. Accordingly the related deferred tax assets have been fully recognized.

The changes in the balance of tax loss carryforwards are as follows:


	2020		2019
Balance at beginning of the period	Ps.	32,536	Ps.	29,941
Derecognized		(8,521)		(377)
Additions		7,538		7,194
Usage of tax losses		(2,444)		(2,947)
Translation effect of beginning balances		(2,491)		(1,275)
Balance at end of the period	Ps.	26,618	Ps.	32,536

There were no withholding taxes associated with the payment of dividends in 2020, 2019 or 2018 by the Company to its shareholders.

The Company has determined that undistributed profits of its subsidiaries will not be distributed in the foreseeable future. As of December 31, 2020, 2019 and 2018, the temporary differences associated with investments in subsidiaries, associates and joint ventures, for which a deferred tax liability has not been recognized aggregate to Ps. 41,280, Ps. 49,255 and Ps. 45,305, respectively.

Other Liabilities, Provisions, Contingencies and Commitments

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Other Liabilities, Provisions, Contingencies and Commitments

Note 26. Other Liabilities, Provisions, Contingencies and Commitments

26.1 Other current financial liabilities


	December 31,		December 31,
	2020		2019
Sundry creditors	Ps.	11,895	Ps.	11,509
Derivative financial instruments (see Note 21)		1,127		848
Other notes payable (1)		—		11,294
Others		3		4
Total	Ps.	13,025	Ps.	23,655

(1)

Related to Socofar’s put option exercised on December 13, 2019.

26.2 Provisions and other non-current liabilities


	December 31,		December 31,
	2020		2019
Contingencies	Ps.	6,303	Ps.	8,854
Payable taxes		651		710
Others		2,586		879
Total	Ps.	9,540	Ps.	10,443

26.3 Other non-current financial liabilities


	December 31,		December 31,
	2020		2019
Derivative financial instruments (see Note 21)	Ps.	3,743	Ps.	1,672
Security deposits		1,279		809
Total	Ps.	5,022	Ps.	2,481

26.4 Provisions recorded in the consolidated statement of financial position

The Company has various loss contingencies and has recorded reserves as other liabilities for those legal proceedings for which it believes an unfavorable resolution is probable. Most of these contingencies are the result of the Company’s business acquisitions. The following table presents the nature and amount of the contingencies recorded as of December 31, 2020 and 2019:


	December 31,		December 31,
	2020		2019
Indirect taxes	Ps.	3,153	Ps.	5,062
Labor		1,857		2,455
Legal		1,293		1,337
Total (1)	Ps.	6,303	Ps.	8,854

(1)

As it is customary in Brazil, the Company is required to guarantee tax, legal and labor contingencies by guarantee deposits. See Note 14.

26.5 Changes in the balance of provisions recorded

26.5.1 Indirect taxes


	December 31,		December 31,		December 31,
	2020		2019		2018
Balance at beginning of the period	Ps.	5,062	Ps.	5,421	Ps.	6,836
Penalties and other charges		—		1		123
New contingencies		489		486		178
Contingencies added in business combination		—		—		104
Cancellation and expiration		(153)		(247)		106
Payments		(218)		(174)		(112)
Reversal of indemnifiable items (1)		(1,177)		—		—
Effects of changes in foreign exchange rates		(850)		(425)		(951)
Effects due to derecognition of Philippines		—		—		(863)
Balance at end of the period	Ps.	3,153	Ps.	5,062	Ps.	5,421

(1)

This amount includes Ps. 899 of certain tax contingencies that expired and are payable to the former shareholders of Spaipa (acquired in 2013).

26.5.2 Labor


	December 31,		December 31,		December 31,
	2020		2019		2018
Balance at beginning of the period	Ps.	2,455	Ps.	2,601	Ps.	2,723
Penalties and other charges		233		293		310
New contingencies		249		521		330
Contingencies added in business combination		—		44		289
Cancellation and expiration		(61)		(283)		(133)
Payments		(592)		(500)		(193)
Effects of changes in foreign exchange rates		(427)		(221)		(725)
Balance at end of the period	Ps.	1,857	Ps.	2,455	Ps.	2,601

26.5.3 Legal


	December 31,		December 31,		December 31,
	2020		2019		2018
Balance at beginning of the period	Ps.	1,337	Ps.	1,906	Ps.	3,296
Penalties and other charges		8		94		86
New contingencies		362		213		72
Contingencies added in business combination		—		77		67
Cancellation and expiration		(141)		(542)		(146)
Payments		(111)		(318)		(251)
Effects of changes in foreign exchange rates		(162)		(93)		(335)
Effects due to derecognition of Philippines		—		—		(883)
Balance at end of the period	Ps.	1,293	Ps.	1,337	Ps.	1,906

While provision for all claims has already been made, the actual outcome of the disputes and the timing of the resolution cannot be estimated by the Company at this time.

26.6 Unsettled lawsuits

The Company has entered into several proceedings with its labor unions, tax authorities and other parties that primarily involve Coca-Cola FEMSA and its subsidiaries. These proceedings have resulted in the ordinary course of business and are common to the industry in which the Company operates. The aggregate amount being claimed against the Company resulting from such proceedings as of December 31, 2020 is Ps. 86,855. Such contingencies were classified by internal legal counsel as less than probable but more than remote of being settled against the Company. However, the Company believes that the ultimate resolution of such several proceedings will not have a material effect on its consolidated financial position or result of operations.

Included in this amount Coca-Cola FEMSA has tax contingencies, most of which are related to its Brazilian operations, with loss expectations assessed by management and supported by the analysis of legal counsel considered as “possible.” The main “possible” contingencies of Brazilian operations amount to approximately Ps. 48,403. This refers to various tax disputes related primarily to: (i) Ps. 8,899 of credits for ICMS (“VAT”); (ii) Ps. 29,280 related to tax credits of “IPI” over raw materials acquired from Free Trade Zone Manaus; (iii) claims of Ps. 4,878 related to compensation of federal taxes not approved by the IRS (Tax authorities); (iv) Ps. 2,677 related to the amortization of goodwill generated in acquisition operations; and (v) Ps. 2,667 relating to liability over the operations of a third party, former distributor, in the period from 2001 to 2003. Coca-Cola FEMSA is defending its position in these matters and final decision is pending in court.

In recent years in its Mexican and Brazilian territories, Coca-Cola FEMSA has been requested to present certain information regarding possible monopolistic practices. These requests are commonly generated in the ordinary course of business in the soft drink industry where the subsidiaries operate. The Company does not expect any material liability to arise from these contingencies.

26.7 Collateralized contingencies

As is customary in Brazil, Coca-Cola FEMSA has been required by the tax authorities there to collateralize tax contingencies currently in litigation amounting to Ps. 7,342, Ps. 10,471 and Ps. 7,739 as of December 31, 2020, 2019 and 2018, respectively, by pledging fixed assets and entering into available lines of credit covering the contingencies, see Note 14. Also, as disclosed in Note 9.2, there is some restricted cash in Brazil related to current deposits in order to fulfill the collateral requirements for accounts payable.

26.8 Commitments

The Company has firm commitments for the purchase of property, plant and equipment of Ps. 432 and Ps. 556 as of December 31, 2020 and 2019, respectively.

Information by Segment

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Information by Segment

Note 27. Information by Segment

The information by segment is presented considering the Company’s business units (as defined in Note 1) based on its products and services, which is consistent with the internal reporting presented to the Chief Operating Decision Maker. A segment is a component of the Company that engages in business activities from which it earns revenues, and incurs the related costs and expenses, including revenues, costs and expenses that relate to transactions with any of Company’s other components. All segments’ operating results are reviewed regularly by the Chief Operating Decision Maker, who makes decisions about the resources that would be allocated to the segment and to assess its performance, and for which financial information is available.

In 2018, FEMSA made a change to the disclosure related to the businesses segments formerly named as FEMSA Comercio’s “Retail Division” by removing those operations that are not directly related to Proximity store business, including restaurant and discount retail units, from this segment. The business segment is now named the FEMSA Comercio – “Proximity Division” and only includes Proximity and Proximity‐related operations, most of which operate today under the OXXO brand across markets. The removed operations are included in “Other.”

Inter-segment transfers or transactions are entered into and presented under accounting policies of each segment, which are the same to those applied by the Company. Intercompany operations are eliminated and presented within the consolidation adjustment column included in the tables below.

By Business Unit:


			FEMSA		FEMSA
			Comercio –		Comercio –
	Coca-Cola		Proximity		Health		FEMSA Comercio –		Heineken				Consolidation
2020	FEMSA		Division		Division		Fuel Division		Investment		Other (1)		Adjustments		Consolidated
Total revenues	Ps.	183,615	Ps.	181,277	Ps.	65,172	Ps.	34,292	Ps.	—	Ps.	49,414	Ps.	(20,804)	Ps.	492,966
Intercompany revenue		5,016		451		—		9		—		15,328		(20,804)		—
Gross profit		82,811		74,296		19,575		4,300		—		13,823		(5,152)		189,653
Administrative expenses		—		—		—		—		—		—		—		22,988
Selling expenses		—		—		—		—		—		—		—		123,405
Other income		—		—		—		—		—		—		—		3,343
Other expenses		—		—		—		—		—		—		—		12,381
Interest expense		7,894		5,932		1,540		1,099		—		4,773		(3,722)		17,516
Interest income		1,048		388		162		40		61		4,123		(3,722)		2,100
Other net finance loss (3)		—		—		—		—		—		—		—		505
Income before income taxes and share of the profit of equity accounted investees		16,077		6,409		753		(224)		48		(4,237)		485		19,311
Income taxes		5,428		(280)		243		(29)		12		9,445		—		14,819
Share of the profit of equity accounted investees, net of tax		(281)		(18)		—		—		(434)		(3)		—		(736)
Net income from continuing operations		—		—		—		—		—		—		—		3,756
Consolidated net income		—		—		—		—		—		—		—		3,756
Depreciation and amortization (2)		10,608		10,574		3,543		865		—		2,562		(103)		28,049
Non-cash items other than depreciation and amortization		1,494		739		28		22		—		138		—		2,421
Investments in equity accounted investees		7,623		3,102		—		—		87,291		254		—		98,270
Total assets		263,066		121,200		60,107		15,878		92,444		191,207		(59,054)		684,848
Total liabilities		140,609		104,141		46,038		14,257		4,011		127,426		(58,821)		377,661
Investments in fixed assets (4)		10,354		6,907		1,694		549		—		1,533		(144)		20,893

(1)

Includes other companies and corporate (see Note 1).

(2)

Includes bottle breakage.

(3)

Includes foreign exchange gain, net; gain on monetary position for subsidiaries in hyperinflationary economies; and market value loss on financial instruments.

(4)

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


			FEMSA		FEMSA		FEMSA
			Comercio –		Comercio –		Comercio –
	Coca-Cola		Proximity		Health		Fuel		Heineken				Consolidation
2019	FEMSA		Division		Division		Division		Investment		Other (1)		Adjustments		Consolidated
Total revenues	Ps.	194,471	Ps.	184,810	Ps.	58,922	Ps.	47,852	Ps.	—	Ps.	41,788	Ps.	(21,132)	Ps.	506,711
Intercompany revenue		5,688		325		—		11		—		15,108		(21,132)		—
Gross profit		87,507		75,099		17,645		4,775		—		11,551		(5,096)		191,481
Administrative expenses		—		—		—		—		—		—		—		19,930
Selling expenses		—		—		—		—		—		—		—		121,871
Other income		—		—		—		—		—		—		—		1,013
Other expenses		—		—		—		—		—		—		—		4,905
Interest expense		6,904		5,733		1,226		1,175		1		2,303		(3,209)		14,133
Interest income		1,230		338		10		114		23		4,563		(3,110)		3,168
Other net finance income (3)		—		—		—		—		—		—		—		(2,527)
Income before income taxes and share of the profit of equity accounted investees		18,409		11,458		1,487		124		10		449		359		32,296
Income taxes		5,648		923		556		49		(491)		3,791		—		10,476
Share of the profit of equity accounted investees, net of tax		(131)		9		—		—		6,428		(78)		—		6,228
Net income from continuing operations		—		—		—		—		—		—		—		28,048
Consolidated net income		—		—		—		—		—		—		—		28,048
Depreciation and amortization (2)		10,642		9,604		3,112		855		—		1,708		(112)		25,809
Non-cash items other than depreciation and amortization		1,083		529		23		105		—		755		—		2,495
Investments in equity accounted investees		9,751		3,719		—		—		83,789		211		—		97,470
Total assets		257,841		117,229		54,366		17,701		86,639		158,746		(54,981)		637,541
Total liabilities		128,154		98,468		53,468		16,754		3,151		66,812		(55,017)		311,790
Investments in fixed assets (4)		11,465		10,374		1,529		706		—		1,685		(180)		25,579

(1)

Includes other companies and corporate (see Note 1).

(2)

Includes bottle breakage.

(3)

Includes foreign exchange loss, net; gain on monetary position for subsidiaries in hyperinflationary economies; and market value loss on financial instruments.

(4)

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


			FEMSA		FEMSA		FEMSA
			Comercio –		Comercio –		Comercio –
	Coca-Cola		Proximity		Health		Fuel		Heineken				Consolidation
2018	FEMSA		Division		Division		Division		Investment		Other (1)		Adjustments		Consolidated
Total revenues	Ps.	182,342	Ps.	167,458	Ps.	51,739	Ps.	46,936	Ps.	—	Ps.	42,293	Ps.	(21,024)	Ps.	469,744
Intercompany revenue		5,160		290		—		—		—		15,574		(21,024)		—
Gross profit		83,938		65,529		15,865		4,231		—		10,233		(4,626)		175,170
Administrative expenses		—		—		—		—		—		—		—		17,313
Selling expenses		—		—		—		—		—		—		—		114,573
Other income		—		—		—		—		—		—		—		673
Other expenses		—		—		—		—		—		—		—		2,947
Interest expense		7,568		1,806		678		211		1		2,057		(2,496)		9,825
Interest income		1,004		372		14		159		22		3,757		(2,496)		2,832
Other net finance expenses (3)		—		—		—		—		—		—		—		(387)
Income before income taxes and share of the profit of equity accounted investees		17,190		13,335		1,438		407		11		1,219		30		33,630
Income taxes		5,260		1,124		652		123		4		3,006		—		10,169
Share of the profit of equity accounted investees, net of tax		(226)		(17)		—		—		6,478		17		—		6,252
Net income from continuing operations		—		—		—		—		—		—		—		29,713
Net income from discontinued operations		—		—		—		—		—		—		—		3,366
Consolidated net income		—		—		—		—		—		—		—		33,079
Depreciation and amortization (2)		10,028		4,971		983		152		—		1,103		—		17,237
Non-cash items other than depreciation and amortization		755		367		22		11		—		490		—		1,645
Investments in equity accounted investees		10,518		84		—		—		83,461		252		—		94,315
Total assets		263,787		75,146		35,881		7,015		86,340		150,674		(42,462)		576,381
Total liabilities		132,037		56,468		23,357		6,142		4,054		61,340		(42,559)		240,839
Investments in fixed assets (4)		11,069		9,441		1,162		520		—		2,391		(317)		24,266

(1)

Includes other companies and corporate (see Note 1).

(2)

Includes bottle breakage.

(3)

Includes foreign exchange gain, net; gain on monetary position for subsidiaries in hyperinflationary economies; and market value loss on financial instruments.

(4)

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

By Geographic Area:

The Company aggregates geographic areas into the following 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), (ii) United States, (iii) the South America division (comprising the following countries: Brazil, Argentina, Colombia, Chile, Ecuador, Peru and Uruguay) and (iv) Europe (comprised of the Company’s equity method investment in Heineken Group). For further information related with aggregates geographic areas see Note 28.2 Disaggregation of revenue.

Geographic disclosure for the Company non-current assets is as follow:


	2020		2019
Mexico and Central America (1)	Ps.	234,679	Ps.	230,889
United States (2)		37,105		13,310
South America (3)		124,470		136,480
Europe		87,326		84,283
Consolidated	Ps.	483,580	Ps.	464,962

(1)

Domestic (Mexico only) non-current assets were Ps. 226,497 and Ps. 223,605, as of December 31, 2020, and December 31, 2019, respectively.

(2)

On May 15, 2020, the Company completed the acquisition of WAXIE Sanitary Supply (“WAXIE”) and North American Corporation (“North American”) to form a new platform within the Jan-San, Packaging and Specialized distribution industry in the United States. The platform will bring together two market leaders in this field: WAXIE and North American, with FEMSA acquiring a majority controlling interest of 89% in the combined company.

(3)

South America non-current assets includes Brazil, Argentina, Colombia, Chile, Uruguay and Ecuador. Brazilian non-current assets were Ps. 66,050 and Ps. 79,710, as of December 31, 2020 and December 31, 2019, respectively. Colombia non-current assets were Ps. 15,653 and Ps. 16,463, as of December 31, 2020 and December 31, 2019, respectively. Argentina non-current assets were Ps. 3,905 and Ps. 4,043, as of December 31, 2020 and December 31, 2019, respectively. Chile non-current assets were Ps. 30,953 and Ps. 28,424, as of December 31, 2020 and December 31, 2019, respectively. Uruguay non-current assets were Ps. 4,537 and Ps. 4,781, as of December 31, 2020 and December 31, 2019, respectively. Ecuador non-current assets were Ps. 3,372 and Ps. 3,064, as of December 31, 2020 and December 31, 2019, respectively.

Revenues

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Revenues

Note 28. Revenues

28.1Nature of goods sold and services

The information sets below described the core activities of the business units from which the Company generates its revenues. According to the standard, the performance obligation for the Company’s business units are satisfied at a point in time that the control of good and services are totally transferred to the customers. For detail information about business segments, see Note 27.

Segment	Product or Service	Nature, timing to fulfill the performance obligation and significant payment terms
Coca-Cola FEMSA	Beverages sales	Includes the delivery of beverages to customers and wholesalers. The transaction prices are assigned to each product on sale based on its own sale price separately, net of promotions and discounts. The performance obligation is satisfied at the point in time the product on sale is delivered to the customer.
Coca-Cola FEMSA	Services revenues	Includes the rendering of manufacturing services, logistic and administrative services. The transaction prices are assigned to each product on sale based on its own sale price if sold separately. The performance obligation is satisfied at the point in time the service is delivered to the customer.
FEMSA Comercio –Proximity Division	Products sales	Operates the largest chain of small-format stores in Mexico and Latin America including as some of its principal products as beers, cigarettes, sodas, other beverages and snacks. The performance obligation is satisfied at the time of the sale or at the moment the control of the product is transferred and the payment is made by the customer.
FEMSA Comercio –Proximity Division	Commercial revenues	Includes mainly the commercialization of spaces into within stores, and revenues related to promotions and financial services. The performance obligation is satisfied at the point in time the service is rendered to the customer.
FEMSA Comercio – Health Division	Product sales	The core products include patent and generic formulas of medicines, beauty products, medical supplements, housing and personnel care products. The performance obligation is satisfied at the point in time of the sale or at the moment the control of the product is transferred to the customer.
FEMSA Comercio – Health Division	Services revenues	Rendering of services adding value as financial institutions, medical consultation and some financial services. The performance obligation is satisfied at the point in time of the rendering or the control is transferred to the customer.
FEMSA Comercio – Fuel Division	Product sales	The core products are sold in the retail service stations as fuels, diesel, motor oils and other car care products. The performance obligation is satisfied at the point in time on sale and/or the control is transferred to the customer.
Others	Integral logistic services	Rendering a wide range of logistic services and maintenance of vehicles to subsidiaries and customers. The operations are on a daily or monthly basis or based upon the customer request. The revenue is recognized progressively during the time the service is rendered in a period no greater than a month.
	Production and sale of commercial refrigeration, plastic solutions and sale of equipment for food processing.	Involves the production, commercialization of refrigerators including its delivery and installation and offering of integral maintenance services at the point of sale. Also includes design, manufacturing and recycling of plastic products. In addition, it includes the sale of equipment for food processing, storage and weighing. The revenue recognition is performed at the time in which the corresponding installation is concluded. The recognition of revenue in other business lines is performed at the point of sale or in time the control of the product is transferred to the customer.
	Product sales in the Jan-San, packaging and specialized distribution industry.	The revenues in this business are integrated from the sale of consumables in the janitorial, sanitary supply, and packaging industry in the United States. The performance obligation is satisfied at the point in time on sale and/or when the control is transferred to the customer.

28.2Disaggregation of revenue

The information sets below described the disaggregation of revenue by geographic area, business unit and products and services categories in which the Company operates. The timing in which the revenues are recognized by the business units in the Company, is mainly at the point in the time in which control of goods and services is transferred in its entirely to the customer.


							FEMSA Comercio –						FEMSA Comercio –						FEMSA Comercio –						Other
		Coca-Cola FEMSA					Proximity Division						Health Division						Fuel Division						Segments						Total
	2020		2019		2018		2020		2019		2018		2020		2019		2018		2020		2019		2018		2020		2019		2018		2020		2019		2018
By geographic areas:
Mexico and Central America (1)	Ps.	106,783	Ps.	109,249	Ps.	100,162	Ps.	179,218	Ps.	182,864	Ps.	166,040	Ps.	9,716	Ps.	8,170	Ps.	7,898	Ps.	34,292	Ps.	47,852	Ps.	46,936	Ps.	27,403	Ps.	32,217	Ps.	31,918	Ps.	357,412	Ps.	380,352	Ps.	352,954
United States (2)		—		—		—		15		—		—		—		—		—		—		—		—		12,250		—		—		12,265		—		—
South America (3)		76,832		85,223		82,180		2,044		1,946		1,418		55,456		50,752		43,841		—		—		—		9,761		9,552		10,350		144,093		147,473		137,789
Venezuela		—		—		—		—		—		—		—		—		—		—		—		—		—		18		25		—		18		25
Total revenues		183,615		194,472		182,342		181,277		184,810		167,458		65,172		58,922		51,739		34,292		47,852		46,936		49,414		41,787		42,293		513,770		527,843		490,768
Consolidation adjustments		5,016		5,688		5,160		451		325		290		—		—		—		9		11		—		15,328		15,108		15,574		20,804		21,132		21,024
Consolidated revenues		178,599		188,784		177,182		180,826		184,485		167,168		65,172		58,922		51,739		34,283		47,841		46,936		34,086		26,679		26,719		492,966		506,711		469,744
By products and/or services
Products sold in the point-of-sale	Ps.	183,615	Ps.	194,472	Ps.	182,342	Ps.	181,277	Ps.	184,810	Ps.	167,458	Ps.	65,172	Ps.	58,922	Ps.	51,739	Ps.	34,292	Ps.	47,852	Ps.	46,936	Ps.	23,254	Ps.	13,198	Ps.	13,240	Ps.	487,610	Ps.	499,254	Ps.	461,715
Services revenues		—		—		—		—		—		—		—		—		—		—		—		—		26,160		28,589		29,053		26,160		28,589		29,053
Consolidation adjustments		5,016		5,688		5,160		451		325		290		—		—		—		9		11		—		15,328		15,108		15,574		20,804		21,132		21,024
Consolidated revenues		178,599		188,784		177,182		180,826		184,485		167,168		65,172		58,922		51,739		34,283		47,841		46,936		34,086		26,679		26,719		492,966		506,711		469,744

(1)

Central America includes Guatemala, Nicaragua, Costa Rica and Panama. Domestic (Mexico only) revenues were Ps. 320,694, Ps. 346,659 and Ps. 319,792 and during the years ended December 31, 2020, 2019 and 2018, respectively.

(2)

On May 15, 2020, the Company completed the acquisition of WAXIE Sanitary Supply (“WAXIE”) and North American Corporation (“North American”) to form a new platform within the Jan-San, Packaging and Specialized distribution industry in the United States. The platform will bring together two market leaders in this field: WAXIE And North American, with FEMSA acquiring a majority controlling interest of 89% in the combined company.

(3)

South America includes Brazil, Argentina, Colombia, Chile, Uruguay and Ecuador. South America revenues include Brazilian revenues of Ps. 62,758, Ps. 67,076 and Ps. 63,601 during the years ended December 31, 2020, 2019 and 2018, respectively. South America revenues include Colombia revenues of Ps. 14,800, Ps. 16,440 and Ps. 19,245 during the years ended December 31, 2020, 2019 and 2018, respectively. South America revenues include Argentina revenues of Ps. 5,531, Ps. 6,857 and Ps. 9,237 during the years ended December 31, 2020, 2019 and 2018, respectively. South America revenues include Chile revenues of Ps. 47,208, Ps. 45,276 and Ps. 44,576 during the years ended December 31, 2020, 2019 and 2018, respectively. South America revenues include Uruguay revenues of Ps. 3,124, Ps. 3,421 and Ps. 1,925 during the years ended December 31, 2020 and 2018, respectively. South America revenues include Ecuador revenues of Ps. 9,467 and Ps.6,539 during the years ended December 31, 2020 and 2019, respectively.

28.3Contract balances

As of December 31, 2020, no significant cost was incurred to obtain or accomplished a contract that might be capitalized as assets. No significant contacts have been entered into for which the Company has not performed all the obligations as well as additional costs associate to them.

28.4 Transaction price assigned to remaining performance obligations

No performance obligations were identified in customer contracts that are not included in the transaction price, as a result of identified variable considerations per each business unit are part of the transaction price through be consider highly probable that not occurs a significant reversion of the revenue amount.

Future Impact of Recently Issued Accounting Standards not yet in Effect

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Future Impact of Recently Issued Accounting Standards not yet in Effect

Note 29. Future Impact of Recently Issued Accounting Standards not yet in Effect

The Company has not applied the following standards, amendments and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.

Classification of Liabilities as Current or Non-current - Amendments to IAS 1

In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify:

What is meant by a right to defer settlement

That a right to defer must exist at the end of the reporting period

That classification is unaffected by the likelihood that an entity will exercise its deferral right

That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification

The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and must be applied retrospectively. The Company is currently assessing the impact the amendments will have on current practice and whether existing loan agreements may require renegotiation.

Reference to the Conceptual Framework – Amendments to IFRS 3

In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations - Reference to the Conceptual Framework. The amendments are intended to replace a reference to the Framework for the Preparation and Presentation of Financial Statements, issued in 1989, with a reference to the Conceptual Framework for Financial Reporting issued in March 2018 without significantly changing its requirements.

The Board also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of IAS 37 or IFRIC 21 Levies, if incurred separately.

At the same time, the Board decided to clarify existing guidance in IFRS 3 for contingent assets that would not be affected by replacing the reference to the Framework for the Preparation and Presentation of Financial Statements. The amendments are effective for annual reporting periods beginning on or after 1 January 2022 and apply prospectively.

Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16

In May 2020, the IASB issued amendments to IAS 16, which prohibits entities deducting from the cost of an item of property, plant and equipment, any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity will recognize the proceeds from selling such items, and the costs of producing those items, in profit or loss.

The amendments are effective for annual reporting periods beginning on or after 1 January 2022 and must be applied retrospectively to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented when the entity first applies the amendments. The amendments are not expected to have a material impact on the Company.

Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37

In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a “directly related cost approach.” The costs that relate directly to a contract to provide goods or services include both incremental costs and an allocation of costs directly related to contract activities. General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract.

The amendments are effective for annual reporting periods beginning on or after 1 January 2022. The Company will apply these amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments.

I - Subsidiary as a first-time adopter - amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards

As part of its 2018-2020 annual improvements to IFRS standards process, the IASB issued an amendment to IFRS 1. The amendment permits a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported by the parent, based on the parent’s date of transition to IFRS. This amendment will also be applied to an associate or joint venture that elects to apply paragraph D16(a) of IFRS 1. The amendment is effective for annual reporting periods beginning on or after January 1, 2022 with earlier adoption permitted.

Fees in the ’10 per cent’ test for derecognition of financial liabilities – amendments to IFRS 9 Financial Instruments

As part of its 2018-2020 annual improvements to IFRS standards process the IASB issued amendments to IFRS 9. The amendments clarify the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendments.

The amendments are effective for annual reporting periods beginning on or after 1 January 2022 with earlier adoption permitted. The Company will apply the amendments to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendments. The amendments are not expected to have a material impact on the Company.

Subsequent Events	12 Months Ended
Subsequent Events	Dec. 31, 2020
IFRS Text Block [Abstract]
Subsequent Events	Note 30. Subsequent Events In February 2021, Coca-Cola FEMSA entered into a new distribution agreement with Heineken Brazil that is intended to replace its previous distribution agreement with Heineken Brazil. The effectiveness of this distribution agreement is subject to various conditions, including the approval of the Brazilian antitrust authorities. Pursuant to the new distribution agreement, Coca-Cola FEMSA will continue to sell and distribute Kaiser, Bavaria and Sol beer brands in Brazil and will add to the premium brand Eisenbahn and other premium international brands to its portfolio. Coca-Cola FEMSA will also cease to sell and distribute Heineken and Amstel beer brands upon the effectiveness of the new distribution agreement. Moreover, Coca-Cola FEMSA will have the right to produce and distribute alcoholic beverages and other beers in Brazil based on a certain proportion of Heineken’s portfolio in Brazil. The agreement has a five-year term and may be automatically renewed for an additional five-year term subject to certain conditions. Upon the effectiveness of the new distribution agreement with Heineken Brazil, which is subject to various conditions, including the approval of the Brazilian antitrust authorities, Coca-Cola FEMSA intends to withdraw from the arbitration and other legal proceedings against Heineken Brazil and waive any rights with respect to any awards or judgements resulting from such arbitration and legal proceedings.

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2020

IFRS Text Block [Abstract]

Basis of consolidation

3.1 Basis of consolidation

Specifically, the Company controls an investee if and only if the Company has:

Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

Exposure, or rights, to variable returns from its involvement with the investee; and

The ability to use its power over the investee to affect its returns.

The contractual arrangements with the other vote holders of the investee;

Rights arising from other contractual arrangements; and

The Company’s voting rights and potential voting rights.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Company loses control over a subsidiary, it:

Derecognizes the assets (including goodwill) and liabilities of the subsidiary.

Derecognizes the carrying amount of any non-controlling interests.

Derecognizes the cumulative translation differences recorded in equity.

Recognizes the fair value of the consideration received.

Recognizes the fair value of any investment retained.

Recognizes any surplus or deficit in profit or loss.

3.1.1 Acquisitions of non-controlling interests

Business combinations

3.2 Business combinations

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

The Company sometimes obtains control of an acquiree without transferring consideration. The acquisition method of accounting for a business combination, applies to those combinations as follows:

(a)

The acquiree repurchases a sufficient number of its own shares for the Company to obtain control.

(b)

Minority veto rights lapse that previously kept the Company from controlling an acquiree in which it held the majority voting rights.

Foreign currencies, consolidation of foreign subsidiaries and accounting equity accounted investees

3.3 Foreign currencies, consolidation of foreign subsidiaries and accounting of equity accounted investees

Exchange differences on monetary items are recognized in consolidated net income in the period in which they arise except for:

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


		Exchange Rates of Local Currencies Translated to Mexican Pesos (1)
	Functional /	Average Exchange Rate for			Exchange Rate as of
	Recording				December 31,	December 31,
Country or Zone	Currency	2020	2019	2018	2020	2019
Guatemala	Quetzal	2.78	2.50	2.56	2.56	2.45
Costa Rica	Colon	0.04	0.03	0.03	0.03	0.03
Panama	U.S. dollar	21.49	19.26	19.24	19.95	18.85
Colombia	Colombian peso	0.01	0.01	0.01	0.01	0.01
Nicaragua	Cordoba	0.63	0.58	0.62	0.57	0.56
Argentina	Argentine peso	0.31	0.41	0.73	0.24	0.31
Brazil	Reais	4.18	4.89	5.29	3.84	4.68
Chile	Chilean peso	0.03	0.03	0.03	0.03	0.03
Euro Zone	Euro (€)	24.48	21.56	22.71	24.52	21.12
Peru	Nuevo Sol	6.15	5.77	5.85	5.51	5.68
Ecuador	U.S. dollar	21.49	19.26	19.24	19.95	18.85
Philippines	Philippine peso	—	—	0.37	—	—
United States	U.S. dollar	21.49	—	—	19.95	—
Uruguay	Uruguayan peso	0.51	0.55	0.63	0.47	0.51

(1)

Exchange rates published by the Central Bank of each country where the Company operates.

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

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

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

The Company restates the financial information of subsidiaries that operate in hyperinflationary economic environment using the consumer price index of each country (“CPI”).

As of December 31, 2020, 2019, and 2018, the operations of the Company are classified as follows:


	Cumulative			Cumulative			Cumulative
	Inflation			Inflation			Inflation
Country	2018- 2020		Type of Economy	2017- 2019		Type of Economy	2016- 2018		Type of Economy
Mexico	11.2	%	Non-hyperinflationary	13.2	%	Non-hyperinflationary	15.7	%	Non-hyperinflationary
Guatemala	10.9	%	Non-hyperinflationary	11.8	%	Non-hyperinflationary	12.2	%	Non-hyperinflationary
Costa Rica	4.5	%	Non-hyperinflationary	5.8	%	Non-hyperinflationary	5.7	%	Non-hyperinflationary
Panama	(1.5)	%	Non-hyperinflationary	0.5	%	Non-hyperinflationary	2.1	%	Non-hyperinflationary
Colombia	8.8	%	Non-hyperinflationary	11.0	%	Non-hyperinflationary	13.4	%	Non-hyperinflationary
Nicaragua	13.5	%	Non-hyperinflationary	15.6	%	Non-hyperinflationary	13.1	%	Non-hyperinflationary
Argentina (a)	209.2	%	Hyperinflationary	179.4	%	Hyperinflationary	158.4	%	Hyperinflationary
Brazil	13.1	%	Non-hyperinflationary	11.1	%	Non-hyperinflationary	25.0	%	Non-hyperinflationary
Philippines	—		—	—	%	Non-hyperinflationary	11.9	%	Non-hyperinflationary
Euro Zone	2.4	%	Non-hyperinflationary	3.6	%	Non-hyperinflationary	2.7	%	Non-hyperinflationary
Chile	8.8	%	Non-hyperinflationary	8.3	%	Non-hyperinflationary	9.7	%	Non-hyperinflationary
Peru	6.2	%	Non-hyperinflationary	5.2	%	Non-hyperinflationary	9.3	%	Non-hyperinflationary
Ecuador	(0.7)	%	Non-hyperinflationary	0.3	%	Non-hyperinflationary	30.3	%	Non-hyperinflationary
United States	3.7	%	Non-hyperinflationary	—		—	—		—
Uruguay	28.5	%	Non-hyperinflationary	22.0	%	Non-hyperinflationary	25.3		Non-hyperinflationary

a)Argentina

Recognizing the monetary position gain or loss in consolidated net income.

Cash and cash equivalents and restricted cash

3.5 Cash and cash equivalents and restricted cash

Investments

3.6 Investments

The investments include debt securities and bank deposits with a maturity of more than three months as of the acquisition date.

Management determines the appropriate classification of investments at the time of purchase and evaluates that classification at the date of each statement of financial position, see Notes 6 and 14.

Financial assets