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Leases
 12 Months Ended
Dec. 31, 2019
Text block [abstract]  
Leases
Note 12. Leases
As of December 31, 2019, 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 mailny include transportation equipment and servers.
As of December 31, 2019, the lease liabilites 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
 
 
  
 
 
 
The interest expense for leases reported in the income statements for the twelve-month period ended December 31, 2019 was Ps. 4,774.
The expense relating to short-term leases and leases of
low-value
assets for the twelve-month period 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 in the Company do not represent a significant impact in profit and loss amounts for the year ended December 31, 2019.
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 in the Company do not represent a significant impact on the
right-of-use
assets at December 31, 2019.
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.