Lessons Learned: Complexities In Reporting In Mexico

2y ago
21 Views
3 Downloads
1.29 MB
43 Pages
Last View : 22d ago
Last Download : 2m ago
Upload by : Victor Nelms
Transcription

PRESENTED BYLessons Learned:Complexities inReporting in MexicoNavigating Cross-Border Issues Between the U.S. & Mexico

To Receive CPE Credit› Individuals Participate in entire webinar Answer polls when they are provided› Groups Group leader is the person who registered & logged on to the webinar Answer polls when they are provided Complete group attendance form Group leader sign bottom of form Submit group attendance form to training@bkd.com within 24 hours of webinar› If all eligibility requirements are met, each participant will be emailed their CPEcertificate within 15 business days of webinar. Due to the large volume of certificatesof completion issued, requests to reissue lost or misplaced certificates will behonored up to 60 days following the webinar

PresentersAlvaro QuezadaBryan WrightPartner, JA Del RioAlvaro.Quezada@jadelrio.comPartner, BKDbwright@bkd.comNavigating Cross-Border Issues Between the U.S. & Mexico

Global Alliances: Praxity at a Glance› Praxity, AISBL, is the world’s largest alliance of independent accounting firms. As members of Praxity ,BKD & JA Del Rio can share knowledge & experience on the local regulations of their countries toprovide specialized global supportCombined turnover 7 billionCountries present in110 Global member offices850 Employees worldwide60,000 Partners4,240 Navigating Cross-Border Issues Between the U.S. & Mexico

Agenda1. General information regarding reporting in Mexico2. Complexities & challenges in Mexico including VAT reportingmatters3. Recommendations for better reporting within Mexico4. Key US GAAP considerations for US parent companiesNavigating Cross-Border Issues Between the U.S. & Mexico

General Information RegardingReporting in MexicoNavigating Cross-Border Issues Between the U.S. & Mexico

Mexican Accounting Overview› MEX GAAP (five series with 56 GAAPS)› IFRS (supplementary & for public companies)› Accrual accounting› Reporting financials to SAT (Mexican IRS) in specific format(XML)Navigating Cross-Border Issues Between the U.S. & Mexico

Complexities & Challenges in MexicoIncluding VAT Reporting MattersNavigating Cross-Border Issues Between the U.S. & Mexico

Complexities (Processing)Electronic Accounting› Journal entries related to vendors & clients require the input of XML informationsuch as Tax ID, tax invoice number, bank account, payment method, tax code ofservice/product, tax rates, withholding rates, measurement unit, currency, exchangerate, payment date, etc. XML should be attached to each journal entry Time consuming & should be managed with specialized software Monthly obligations – electronic trial balance, chart of accounts, & journal entries**Navigating Cross-Border Issues Between the U.S. & Mexico

Complexities (Processing)Choosing the Right Accounting Software› ERP – Mexican version is needed to comply with electronic accounting regulations› Consolidation module included (if possible)› QuickBooks*› Netsuite› SAP› Dynamics› Sage Intacct*› M3› XeroNavigating Cross-Border Issues Between the U.S. & Mexico

Complexities (Processing)Currency & Language› All transactions must be in Spanish & in pesos› Recommended to have ERP allowing multicurrency transactions› There is official exchange rate for dollar transactions publishedmonthly in the official gazetteNavigating Cross-Border Issues Between the U.S. & Mexico

Complexities (Processing)Difference vs. US GAAP› Most ERP do not allow a double set of books› Differences are controlled in Excel spreadsheets› Room for error & manual reporting process› Accounting policies tropicalization (fixed asset capitalization, revenuerecognition, cost center, etc.)Navigating Cross-Border Issues Between the U.S. & Mexico

Complexities (Processing)Accounting Prepared by US CPA – HQ› Entries without tax requirements› English description› Tax accounts (VAT, income tax, etc.) not used properly› Adjusting entries required regarding MEX GAAP & tax control› Adjusting entries posted usually in next period› Reconciliation process between US Books & Mex BooksNavigating Cross-Border Issues Between the U.S. & Mexico

Complexities (Reporting)Chart of Accounts› Mapping Parent’s CoA since the beginning of operations will ensure more accurateconsolidated financials› For better control, Mexican companies open more accounts to control taxes (VAT,Withholdings, etc.)› Additional mapping to tax chart of account (only for reporting to SAT)› Most companies use sub-accounts instead of dimensions which are strong tool offered byERPNavigating Cross-Border Issues Between the U.S. & Mexico

Complexities (Reporting)Conversion of Financial Statements› Most ERP do not have the feature to issue financials in different currencies, only at transactionlevel› Conversion of pesos MEX GAAP financials to dollar US GAAP is usually prepared in Excel› Translation effect could be representative due to fluctuation of MXN versus USD› Nonmonetary accounts – historical USD› Monetary accounts – exchange rate of the last day of the periodNavigating Cross-Border Issues Between the U.S. & Mexico

Complexities (Reporting)Periodicity› Monthly: Day 1 to the last day› Annually: January–DecemberDepending on the company’s business cycle, periods could be based on specific calendar orweeksNot all ERP have the feature to have custom reporting periodsNavigating Cross-Border Issues Between the U.S. & Mexico

Value-Added TaxCash Basis & Monthly TaxOperations/activities subject to VATa) Transfer of goodsb) Rendering of servicesc) Temporary use or enjoyment of goodsd) Importation of goods or servicesNavigating Cross-Border Issues Between the U.S. & Mexico

Value-Added TaxRates› 16% general› 8% at the border› 0% exportation & specific operations & benefits (IMMEX)Navigating Cross-Border Issues Between the U.S. & Mexico

Value-Added TaxSub-accounts needed for better control (balance sheet)GL – Tax Payable (VAT)GL – Tax Creditable (VAT)› VAT Payable› VAT Creditable› VAT Payable Pending to Collect› VAT Creditable Pending to Be Paid› VAT Withheld (4%, 6%, 10%, 16%)› VAT in FavorNavigating Cross-Border Issues Between the U.S. & Mexico

Value-Added TaxSales Effectively CollectedPurchase & Expenses (Paid)Monthly Sales 10,000Expenses of the Month 1,000VAT Charged 16% 1,600VAT Creditable 16% Purchase of Products 5,000VAT Creditable 16% Total Monthly VAT Collected 1,600160800Total Monthly VAT Creditable 960Navigating Cross-Border Issues Between the U.S. & Mexico

Value-Added TaxCalculationTotal Monthly VAT Collected 1,600Total Monthly VAT Creditable 960VAT Payable 640Due date:17th of thefollowing monthNavigating Cross-Border Issues Between the U.S. & Mexico

Value-Added TaxThe authority has 20business days torequest moreinformationRefund ProcessUp to three monthsIf refund is approved, thedeposit should be withinthe next 10 daysThe company has 10business days toprovide itThe company has 20business days toprovide itThe authority has asecond chance of 10business days to requestextra information*Navigating Cross-Border Issues Between the U.S. & Mexico

Recommendations for BetterReporting Within MexicoNavigating Cross-Border Issues Between the U.S. & Mexico

Recommendations› ERP in compliance with tax regulations in Mexico (multicurrency,custom reporting, XML attached, etc.)› Set up ERP for automate consolidation process (if possible)› Accounting policy implemented in subsidiary› Mapping CoA since inception of the company› Basic training to US accounting team about tax accounting in MexNavigating Cross-Border Issues Between the U.S. & Mexico

Recommendations› US GAAP differences identified & control for conversion purposes› Avoid double accounting (in US & MX ERP)› Reconciling financials frequently› Functional currency analysis› Analytic reviewing about conversion financial statements to USdollars› VAT netting entries once calculation is completedNavigating Cross-Border Issues Between the U.S. & Mexico

Recommendations1) Subsidiary’s Accounting Prepared by US CPAHQ AccountantProcess MexOps in US ERPSends Info toSubsidiaryUpload inMexican ERPReviewing forMEX GAAP &Tax ComplianceComparativeFinancials US djust EntriesPost in US ERPAdjusting EntriesProposalNavigating Cross-Border Issues Between the U.S. & Mexico

Recommendations2) Accounting Prepared by Mex Subsidiary or Outsourced CPA in MexicoSubsidiary PostsEntries inMexican ERPClosing EntriesConsolidationProcessPreparingFinancial inPesos (MEXGAAP)Adjusting Entriesfor US GAAPHQ ReceivesFinancialsConversion ofFinancialStatements ASC830Navigating Cross-Border Issues Between the U.S. & Mexico

Key US GAAP Considerationsfor US Parent CompaniesNavigating Cross-Border Issues Between the U.S. & Mexico

US GAAP Considerations forSubsidiaries in Mexico› Guidance – ASC Topic 830 – Foreign Currency Matters› Translation or remeasurement of the MX subsidiary into USD(reporting currency)?› Depends on the functional currency of the subsidiary Generally, either the local currency or the parent’s reporting currencyNavigating Cross-Border Issues Between the U.S. & Mexico

What Is Functional Currency?› The currency of the primary economic environment for the entity’soperations – primary currency for sources & uses of cash› Some guiding questions Is the subsidiary self-contained in Mexico or an extension of the parent’soperations? Is financing provided by the parent, thus impacting the subsidiary?› Judgment required for entities involved with various currenciesNavigating Cross-Border Issues Between the U.S. & Mexico

Reporting Implications› If the peso is the functional currency of the subsidiary Translation into the USD reporting currency of the US parent would beapplicableo Balance sheet date FX rate (balance sheet accounts) & average FX rate for P&L& cash flowso Cumulative translation adjustment reported in equity – AOCINavigating Cross-Border Issues Between the U.S. & Mexico

Reporting Implications› If the USD is the functional currency of the MX subsidiary Remeasurement of the MX subsidiary pesos into USD required Monetary assets & liabilities remeasured at the balance sheet date FXrate (Cash, A/R, A/P, accrued expenses, etc.) Nonmonetary assets & liabilities & related revenue & expensesremeasured at historical rateso Inventory, prepaids, intangibles, PP&E, equity deferred revenue Currency gain/losses reported in earningsNavigating Cross-Border Issues Between the U.S. & Mexico

Complex Currency Example› Local currency – MX peso› Functional currency – USD (remeasurement to USD)› Reporting currency – euro (translations from USD)Navigating Cross-Border Issues Between the U.S. & Mexico

Navigating Cross-Border Issues Between the U.S. & Mexico

Main Differences vs. US GAAPNavigating Cross-Border Issues Between the U.S. & Mexico

Main Differences vs. US GAAPInventoryCosting MethodUS GAAPMEX GAAPFIFOLIFOAVGIt could be different for all inventory typesReversing impairment adjustment not allowedMust be the same for all inventory typesAllowedNavigating Cross-Border Issues Between the U.S. & Mexico

Main Differences vs. US GAAPRevenue RecognitionUS GAAPMEX GAAPTransferring risks & benefitsSpecific guidelines for software companiesRevenue register when signing a contractNavigating Cross-Border Issues Between the U.S. & Mexico

Main Differences vs. US GAAPP&LUS GAAPPublic companies should present expenses byfunction (administrative, operation, COGS)There is no specific formatMEX GAAPPresent by function or by nature(salaries, depreciation, rent)Specific format: “Statement ofComprehensive Income”Navigating Cross-Border Issues Between the U.S. & Mexico

Main Differences vs. US GAAPOthersUS GAAPMEX GAAPChanges inAccounting PoliciesAdjusted in Current PeriodRetroactive AdjustmentHyperinflationAdjustmentsNot AllowedAllowedInterest Capitalization(Fixed Assets)AlwaysOnly when Exceeding OneYearNavigating Cross-Border Issues Between the U.S. & Mexico

Questions?

Continuing ProfessionalEducation (CPE) CreditBKD, LLP is registered with the National Association of State Boards ofAccountancy (NASBA) as a sponsor of continuing professionaleducation on the National Registry of CPE Sponsors. State boards ofaccountancy have final authority on the acceptance of individualcourses for CPE credit. Complaints regarding registered sponsors maybe submitted to the National Registry of CPE Sponsors through itswebsite: www.nasbaregistry.orgThe information contained in these slides is presented by professionals for your information only & is not to beconsidered as legal advice. Applying specific information to your situation requires careful consideration of facts &circumstances. Consult your BKD advisor or legal counsel before acting on any matters coveredNavigating Cross-Border Issues Between the U.S. & Mexico

CPE Credit› CPE credit may be awarded upon verification of participantattendance› For questions, concerns, or comments regarding CPE credit,please email the BKD Learning & Development Department attraining@bkd.comNavigating Cross-Border Issues Between the U.S. & Mexico

Thank You!Alvaro Quezada 52 (33) 3669 5300 Ext. 103Alvaro.Quezada@jadelrio.comBryan Wright317.383.5471bright@bkd.com

› Guidance – ASC Topic 830 – Foreign Currency Matters › Translation or remeasurement of the MX subsidiary into USD (reporting currency)? › Depends on the functional currency of the subsidiary Generally, either the local currency or the parent’s reporting currency

Related Documents:

LESSONS_LEARNED_REPORT BI Project Page 1 PROJECT LESSONS LEARNED REPORT Project Name: Business Intelligence (BI) Prepared by: Diane Kleinman Date: June 15, 2009 Project Close-Out Discussion A Lessons Learned meeting was held on 6/12/09. The summarized lessons learned survey results are attached to this document. Attendees: Janet Heller Vel Angamthu

As the centralized lessons learned capability for the Army, CALL synthesizes input from across the ALLP community and disseminates pertinent lessons learned information to units to help plan, prepare, and execute mission requirements. This collaboration allows TRADOC, as the lead for Army lessons learned, to provide

Apr 19, 1995 · Lessons Learned Major Lessons Learned Lessons Learned through Response/Recovery Operations Lessons Learned from Other Agencies Statistics Introduction, Summary of Fatalities and Injuries Exhibits Exhibit A - Murrah Building Floor Plan Image of Floors 1 and 2 (73Kb) Imag

TOPIC 12 Understand Fractions as Numbers 8 LESSONS 13 DAYS TOPIC 13 Fraction Equivalence and Comparison 8 LESSONS 12 DAYS TOPIC 14 Solve Time, Capacity, and Mass Problems 9 LESSONS 11 DAYS TOPIC 15 Attributes of Two-Dimensional Shapes* 5 LESSONS 9 DAYS TOPIC 16 Solve Perimeter Problems 6 LESSONS 8 DAYS Step Up Lessons 10 LESSONS 10 DAYS TOTAL .

Learned.” The USFA acknowledges the effort of the individuals responsible for producing those legacy works. The updated content from those two publications is coupled in this report with a stronger focus on learning from lessons learned. The lessons learned by first responders and emergency managers in the April 2011 tornado outbreak in

The purpose of a lessons learned activity following a cyber incident is to reflect, learn and improve. Lessons learned from the incident should be used to improve security measures and the incident handling process itself. This paper is an overarching lesson learned report for SEPA. To produce this paper, information has been

The Warrior King (Lessons 41—44) 64 Two Splendid Kingdoms (Lessons 45—50) 69 The Man of the Fish (Lessons 51—54) 76 A Miraculous Birth (Lessons 55—61) 81 The Man with the Two Horns (Lessons 62—64) 90 The Hidden Cave (Lessons 65—70) 95 . Le

Number of lessons (per week): 10 lessons (PT), 20 lessons (SI), 24 lessons (SIP), 30 lessons (INT) and 20 lessons 10 individual lessons (CC) Lesson duration: 50 minutes . Age: Minimum of 17 years old No maximum age requirement. Offered: Year-round . Courses Available: Part-time Course (PT) Semi-Intensive English Course (SI) Semi-Intensive Plus .