IFRS Application in Mexico
Importance of IFRS in Mexico
The international regulatory framework has played an important role in financial reporting in Mexico. In fact, Mexico has adopted IFRS standards for all listed companies, other than financial institutions and insurance companies, whose application began for those annual reporting periods beginning on January 1, 2012.
Companies belonging to the financial and insurance sectors use Mexican Financial Reporting Standards (NIF) plus certain requirements established by the National Banking and Securities Commission (CNBV) and the National Insurance and Bonding Commission (CNSF).
The Mexican Financial Reporting Standards Board (CINIF) was created in May 2002 as an independent body, to achieve the convergence process of local accounting standards. The CINIF’s challenge is to maintain itself as a leading organization in the development and improvement of accounting standards and aims to meet the objective of developing transparent, objective and reliable financial reporting standards related to the performance of economic and government entities, which are useful for issuers and users of financial information.
To achieve this, it carries out research and monitoring processes among the financial and business community and other interested sectors, resulting in the issuance of documents called Financial Reporting Standards (NIF), Orientation to Financial Reporting Standards (ONIF), being the improvements a document that includes proposals for specific changes to NIFs, INIFs and ONIFs as clarifications and guidelines for the implementation of NIFs.
The CINIF has an assembly of members composed by:
- Association of Banks of Mexico.
- Mexican Association of Stock Market Intermediaries.
- Mexican Institute of Finance Executives.
- National Association of Accounting and Administration Schools and Faculties
- Mexican Stock Exchange.
- National Banking and Securities Commission.
- National Commission of Insurances and Bonds.
- Business Coordinating Council.
- Mexican Institute of Public Accountants.
- Secretary of the Public Function.
- Ministry of Finance and Public Credit.
- Mexican Association of Insurance Institutions.
- Mexican Council of Businessmen.
The philosophy of the NIFs is to achieve, on the one hand, the convergence of local standards used by the various sectors of the economy, and on the other hand, to converge as much as possible with the International Financial Reporting Standards (IFRS) issued by the IASB.
Structure of Mexican standards
The structure of the FRS presented in FRS A-1 is similar to that of the International Financial Reporting Standards (IFRS) issued by the IASB, given that these are also integrated by conceptual and particular standards:
- FRS and NIFs issued by the CINIF.
- The bulletins issued by the CPC that have not been modified, replaced or repealed by the new FRS.
- The IFRS applicable in a supplementary manner.
The NIFs are made up of four main sections:
- Conceptual Standards that make up the so-called conceptual framework (CM). It establishes the fundamental concepts that serve as rational support for the development of the NIFs and as a reference for the solution of the problems that arise in accounting practice.
- Specific Standards They establish the specific bases for valuation, presentation and disclosure of transactions, internal transformations and other events that economically affect an entity, for the issuance of financial information in a given place and time.
- Interpretations to the NIFs (INIFs) Their purpose is to: Clarify or expand on issues already contemplated in some NIFs (NOT SUBJECTED) Provide timely guidance on new problems detected in the financial information that are not specifically addressed in the NIFs or on those problems on which unsatisfactory or contradictory treatments have been or will be developed.
- Guidance on NIFs (ONIF) These are guidelines on emerging issues that require prompt attention, which are not subject to monitoring and are therefore not compulsory.
The NIFs are grouped as follows:
- Series NIF A – Conceptual framework.
- Series NIF B – Standards applicable to financial statements as a whole.
- NIF C series – Standards applicable to specific concepts of financial statements.
- NIF D series – Standards applicable to problems in determining results.
- NIF E series – Standards applicable to special activities in different sectors.
Since 2006 the CINIF has updated and issued a set of new standards. During the years ended 2018 and 2019, important changes occurred that may have significant impacts on the Financial Statements.
The standards that came into effect as of January 1, 2018 are as follows:
- NIF B-17, Determination of Fair Value.
- NIF C-2, Investment in Financial Instruments.
- NIF C-3, Accounts Receivable.
- NIF C-9, Provisions, Contingencies and Commitments.
- NIF C-10, Derivative Financial Instruments and Hedging Relationships.
- NIF C-16, Impairment of Financial Instruments Receivable.
- NIF C-19, Financial Instruments Payable.
- NIF C-20, Financial instruments receivable.
- NIF D-1, Income from contracts with customers.
- NIF D-2, Costs for Contracts with Clients.
The standard that came into effect on January 1, 2019 is as follows:
- NIF D-5 Leases.
Mexico chose to adopt the full IFRS version, and apply a convergence plan by building its body of accounting standards called NIF (Normas de Información Financiera de México) without losing sight of the IFRS (Normas Internacionales de Información Financiera) issued by the IASB (International Accounting Standards Board).
Mexico continues the process of preparing the NIFs by presenting monitoring projects. Similarly, it presents improvements to the NIFs due to the fact that the accounting standards issuing bodies emphasize the importance of following up on the NIFs already issued since these are in constant evolution with the intention of being updated based on international standards and regulations.