SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Income tax, corporate flat tax, and employee profit sharing, prepaid or deferred (Policies)

12 Months Ended

Dec. 31, 2012

Policies

Income tax, corporate flat tax, and employee profit sharing, prepaid or deferred

Income tax, corporate flat tax, and employee profit sharing, prepaid or deferred

Provisions for income tax (ISR for its Spanish acronym), corporate flat tax (IETU for its Spanish acronym) and employee profit sharing (PTU for its Spanish acronym) are recorded in income for the year they become payable. Also, a deferred tax effect arising from temporary differences is included which results from comparing book and tax values of assets and liabilities. This also includes the benefit of tax loss carryforwards and tax credits. A deferred tax asset is recorded only when there is a high likelihood that it can be recovered. Deferred taxes are determined using enacted tax rates that are estimated to be effective on the dates temporary items will be reversed or realized. The PTU payable and deferred is considered as an ordinary expense as part of employee benefits.

Corporate Flat Tax (IETU) is a tax that co-exists with Income Tax; therefore, the Company has drawn up projections based on reasonable, reliable assumptions properly supported, and represent Management’s best estimate where it has identified that the expected trend is essentially that Income Tax will be paid in future years. Accordingly, only deferred Income Tax has been recognized.