Advisory on financial reporting standards

Establishing functional currency in a globalised world is particularly important, as its accounting effects may vary considerably due to fluctuations in exchange rates. Our services include carrying out specific studies to assist you in defining and supporting currency.  

The purpose of correctly determining and recognising the deferred effects of tax on profits is to comply with the principle of accounting indebtedness, covering financial earnings with their tax effects in the same accounting period.

This is also particularly useful in the decision-making process, as it shows the effects that will be payable or recoverable in the future for this, and in making sure that tax due in the current period to be paid to the tax authorities is calculated correctly.

Our experience has shown us that tax calculation of corporate profit tax (current), considered as final, has altered as a consequence of properly analysing or determining the deferred effect of profit tax, thereby achieving substantial savings in this area.

We specialise in diagnosing or establishing the deferred effect or profit tax.

Current accounting trends establish the obligation to prospectively establish the performance of the organisation to evaluate and value the recognised amount of long-lasting assets and, thereby, establish if there is any possible impairment that should be recognised in accounting terms.

This determination implies considerable variables and suppositions that should be properly analysed and backed, ranging range from correctly estimating forecast cash flows and their variables, to correctly identifying units that produce cash, including defining variables when calculating current value and accounting entry and disclosure [sic].

We carry out diagnoses or studies in order to back the non-existence or nature of signs of impairment and, if necessary, calculate the deterioration value to be taken into account.

International accounting trends establish the obligation to depreciate long-lasting assets by component (componentization) as function of their operating life, if they are substantially different from one another.

In view of this obligation, professional judgment is required when establishing those assets that may be subject to componentization and recalculation of values and determining any necessary adjustments.

Our services include this analysis, and defining and introducing accounting policy in the area of componentization, as from when assets are first accounted for, mainly property, plant and specialized equipment.

The current level of inflation in Mexico has led to the suspension of recognising the effect of inflation on financial information. Nevertheless, both Mexican and international financial information standards remain effective and there is no exemption if the inflation parameters established in these standards are met.

Therefore, it is recommendable to continue determining the effect of inflation, even when it is not recognised. With regard to this aspect, our specialists establish the best determination base, including correctly classifying financial items as monetary and non-monetary.

Current trends establish the obligation of organisations to recognise intangible values, however, recognition and valuation rules are strict, which makes it difficult to determine their value and recognition.

Recognising intangible assets supposes that there is an asset that increases the value of the organisation, so it is crucial that it must be valued and recognised correctly. 

Recognition must observe the rules standardized internationally, either for intangibles produced internally or those acquired, and their valuation must ensure benefits in the future.

Our specialists will help you to validate proper compliance with recognition rules or to financially value certain intangibles subject to financial valuation.

The new lease financial reporting standard establishes the obligation to recognize operating leases as financial leases, existing certain options for not application, also, to evaluate and identify any implicit lease component existing through contracts structured as service contracts.

Recognition of a financial lease has substantially different effects in comparison with an operative lease mainly at the EBITDA level, recognizing assets and liabilities. With the current lease reporting financial standard, the treatment of operative leases as financial leases, requires the recognition of Rights of Use Assets and a Lease Liabilities.

Recognition requires the evaluation of certain parameters or indicators established by the lease financial reporting standard and if applicable, to determine the amounts through the future cash flows projection and its discount determining therefore, their present value.

Our services include:

• Assessment and evaluation of lease contracts, identifying the key elements to define the application of the lease financial reporting standard.
• Analysis and evaluation of service contracts or others under a different legal structure type, in order to identify existence or not of a leasing component subject to the lease financial reporting standard.
• If applicable, analysis of available options for not application of the lease financial reporting standard.
• Documentation of the evaluation route, supporting application of the lease financial reporting standards in front of any external reviewers.
• Advisory for the definition process over key elements (term, discount rate, lease amount to be considered in calculation considering specific situations related with the extension or anticipated cancellation options, grace periods, incentives, initial costs, possible variability of amounts, etc.)
• Present value determination for the recognition of assets and liabilities in compliance with the lease reporting financial standard.
• Determination of proposed adjustments and disclosure requirements. This, as part of the initial recognition or as a continuous professional service for accounting records maintenance.
• Determination of differences among the NIF D-4, IFRS-16 and ASC-842.
• Training.