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Other Liabilities, Provisions, Contingencies and Commitments
 12 Months Ended
Dec. 31, 2019
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Other Liabilities, Provisions, Contingencies and Commitments
Note 26. Other Liabilities, Provisions, Contingencies and Commitments
26.1 Other current financial liabilities
 
 
  
December 31,
2019
 
  
December 31,
2018
 
Sundry creditors
  
Ps.
 11,509
 
  
Ps.
 8,489
 
Derivative financial instruments (see Note 21)
  
 
848
 
  
 
384
 
Other notes payable
(1)
  
 
11,294
 
  
 
—  
 
Others
  
 
4
 
  
 
20
 
 
  
 
 
 
  
 
 
 
Total
  
Ps.
23,655
 
  
Ps.
8,893
 
 
  
 
 
 
  
 
 
 
 
(1)
 
Related to Socofar’s put option exercised on December 13, 2019.
26.2 Provisions and other
non-current
liabilities
 
 
  
December 31,
2019
 
  
December 31,
2018
 
Contingencies
  
Ps.
 8,854
 
  
Ps.
 9,928
 
Payable taxes
  
 
710
 
  
 
873
 
Others
  
 
879
 
  
 
767
 
 
  
 
 
 
  
 
 
 
Total
  
Ps.
 10,443
 
  
Ps.
 11,568
 
 
  
 
 
 
  
 
 
 
26.3 Other financial liabilities
 
 
  
December 31,
2019
 
  
December 31,
2018
 
Derivative financial instruments (see Note 21)
  
Ps.
 1,672
 
  
Ps.
 1,262
 
Security deposits
  
 
809
 
  
 
970
 
 
  
 
 
 
  
 
 
 
Total
  
Ps.
2,481
 
  
Ps.
2,232
 
 
  
 
 
 
  
 
 
 
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, 2019 and 2018:
 
 
  
December 31,
2019
 
  
December 31,
2018
 
Indirect taxes
  
Ps.
 5,062
 
  
Ps.
 5,421
 
Labor
  
 
2,455
 
  
 
2,601
 
Legal
  
 
1,337
 
  
 
1,906
 
 
  
 
 
 
  
 
 
 
Total
  
Ps.
8,854
 
  
Ps.
9,928
 
 
  
 
 
 
  
 
 
 
 
26.5 Changes in the balance of provisions recorded
26.5.1 Indirect taxes
 
 
  
December 31,
2019
 
  
December 31,
2018
 
  
December 31,
2017
 
Balance at beginning of the period
  
Ps.
 5,421
 
  
Ps.
 6,836
 
  
Ps.
 11,065
 
Penalties and other charges
  
 
1
 
  
 
123
 
  
 
362
 
New contingencies
  
 
486
 
  
 
178
 
  
 
91
 
Contingencies added in business combination
  
 
—  
 
  
 
104
 
  
 
861
 
Cancellation and expiration
  
 
(247
) 
  
 
106
 
  
 
(796
) 
Payments
  
 
(174
) 
  
 
(112
) 
  
 
(947
) 
Brazil amnesty adoption
  
 
—  
 
  
 
—  
 
  
 
(3,321
) 
Effects of changes in foreign exchange rates
  
 
(425
) 
  
 
(951
) 
  
 
(479
) 
Effects due to derecognition of Philippines
  
 
—  
 
  
 
(863
) 
  
 
—  
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Balance at end of the period
  
Ps.
5,062
 
  
Ps.
 5,421
 
  
Ps.
 6,836
 
 
  
 
 
 
  
 
 
 
  
 
 
 
26.5.2 Labor
 
 
  
December 31,
2019
 
  
December 31,
2018
 
  
December 31,
2017
 
Balance at beginning of the period
  
Ps.
 2,601
 
  
Ps.
 2,723
 
  
Ps.
 2,578
 
Penalties and other charges
  
 
293
 
  
 
310
 
  
 
56
 
New contingencies
  
 
521
 
  
 
330
 
  
 
283
 
Contingencies added in business combination
  
 
44
 
  
 
289
 
  
 
—  
 
Cancellation and expiration
  
 
(283
) 
  
 
(133
) 
  
 
(32
) 
Payments
  
 
(500
) 
  
 
(193
) 
  
 
(92
) 
Effects of changes in foreign exchange rates
  
 
(221
) 
  
 
(725
) 
  
 
(69
) 
Venezuela deconsolidation effect
  
 
—  
 
  
 
—  
 
  
 
(1
) 
 
  
 
 
 
  
 
 
 
  
 
 
 
Balance at end of the period
  
Ps.
2,455
 
  
Ps.
2,601
 
  
Ps.
2,723
 
 
  
 
 
 
  
 
 
 
  
 
 
 
26.5.3 Legal
 
 
  
December 31,
2019
 
  
December 31,
2018
 
  
December 31,
2017
 
Balance at beginning of the period
  
Ps.
 1,906
 
  
Ps.
 3,296
 
  
Ps.
 2,785
 
Penalties and other charges
  
 
94
 
  
 
86
 
  
 
121
 
New contingencies
  
 
213
 
  
 
72
 
  
 
186
 
Contingencies added in business combination
  
 
77
 
  
 
67
 
  
 
783
 
Cancellation and expiration
  
 
(542
) 
  
 
(146
) 
  
 
(16
) 
Payments
  
 
(318
) 
  
 
(251
) 
  
 
(417
) 
Brazil amnesty adoption
  
 
—  
 
  
 
—  
 
  
 
7
 
Effects of changes in foreign exchange rates
  
 
(93
) 
  
 
(335
) 
  
 
(151
) 
Venezuela deconsolidation effect
  
 
—  
 
  
 
—  
 
  
 
(2
) 
Effects due to derecognition of Philippines
  
 
—  
 
  
 
(883
) 
  
 
—  
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Balance at end of the period
  
Ps.
 1,337
 
  
Ps.
 1,906
 
  
Ps.
 3,296
 
 
  
 
 
 
  
 
 
 
  
 
 
 
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, 2019 is Ps. 81,683. Such contingencies were classified by 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. 53,937. This refers to various tax disputes related primarily to: (i) Ps. 10,378 of credits for ICMS (“VAT”); (ii) Ps. 34,102 related to tax credits of “IPI” over raw materials acquired from Free Trade Zone Manaus; (iii) claims of Ps. 6,274 related to compensation of federal taxes not approved by the IRS (Tax authorities) and (iv) Ps. 3,183 related to the requirement by the Tax Authorities of State of São Paulo for ICMS (“VAT”), interest and penalty due to the alleged underpayment of tax arrears for the period 1994-1996. 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 this subsidiaries operates. 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. 10,471, Ps. 7,739 and Ps. 9,433 as of December 31, 2019, 2018 and 2017, 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. 556 as of December 31, 2019.