Mexico

6 Chapter Accounting

    • Law and regulation of relating accounting

       The technique of accounting is governed by the Financial Reporting Standards (formerly generally accepted accounting principles) are not rules or standards of conduct required, but are the basis of a technique such as accounting, which is the same auxiliary in the management of companies, that is to say, as a method of valuation of the companies that own provides consistent results and allows verification testing, monitoring advisable. 

    • Period of accounting

       The accounting cycle is the period of time in which all transactions in a company happen, either monthly, quarterly, or annually; the most used is the annual. The procedures of the accounting cycle are those steps that are performed to finally display the financial information of a company.

      The accounting cycle includes all necessary administration to provide quantified information required to plan, monitor and disclose the financial situation and the company operation activities.

      The cycle is the set of steps or phases of accounting that are repeated in each accounting period during the life of a business. It begins with the registration of transactions, continues the work of pass amounts reported daily to the general ledger, preparation of trial balance, the worksheet, financial statements, accounting general ledger, and finally the balance of post-closing trial.

    • Bookkeeping

       The bookkeeping is part of the accounting program. It refers only to the registration and maintenance of financial records. A bookkeeper enters information and maintains its accounts. The bookkeeping is an essential part of any complete system, currently the concept of bookkeeping (Teneduría de libros) has fallen into disuse in Spanish it is known simply as accounting.

    • System of internal audit

       The internal audit is the one based in the labor field of the company, being so basic to help manage and have a good internal control tool. The main objective is to verify and assess compliance, enforcement and application of standards and internal control procedures established by the guidance and suggest corrective measures.

      Internal audit is part of internal control, and has as one of its main objectives the improvement and protection of internal control. The diagnosis of auditor is intended for the company.

       

    • System of external audit

       The external audit is a foreign company that monitors financial statements of a company; the primary purpose is to express an independent professional opinion on the accounts. The objective of external audit is intended for third parties outside the company or state entities.

      ■Duty of Audit

      According to the Securities Market Act, each company must have an independent external auditor, which may be called as a guest the meetings of the governing board. It gives an opinion on the financial statements prepared based on auditing standards, which deal with: Accuracy, adequacy and fairness of the financial information.
      The public accountant must have certain personal characteristics like care, diligence and independence of mind and features related to the execution of work and planning supervision.
      The auditors who issue opinions liable for damages and losses incurred when the opinion negligently or opinion provided to the public containing vices, defects or omissions.
       
      ■Content of audit
      Some of the techniques are the General Survey audit, analysis, inspection, confirmation, investigation, statements, observation, calculation and testing.
      The overall study can be just by reading the financial statements, accounts or documents, in these conditions this would be an informal technique.
      If the study is developed using comparative or some other technical resources, we would be using a formal technique. The analysis consists of breaking down or breaking a particular universe in its parts for the studies and generally applies to generic accounts or items of the financial statements.
      The audit covers the following, cash and banks, investments, receivables, net sales, cost of sales, deferred charges, expenses, accounts and notes payable in the short term, long-term liabilities, accrued expenses, deferred credits, contingencies, equity, etc.
       
      ■Tax audit
      The tax audit is responsible for monitoring and evaluating public accounting for tax purposes, contributing to the increase in revenues through the multiplier effect of effective fiscal presence.
        The activities carried out are the integration and review documents of audits carried out on taxpayers; develop assessment folders checks and analysis of compliance with tax obligations; develop applications to facilitate decision-making.
      Assist in the review of accounting for individuals and corporations with business activities in the registration and control of incoming and outgoing correspondence; you will design will capture formats and databases.
      There are several reasons behind the intervention of the authority vested in the revision of the Fulfilment of taxes, either upon complaint, as a result of other audits, others derived from economic studies.
      The Secretariat of Finance and Public Credit has done in the exercise of tax audit at the federal level, such as:
      Reviews statements, home visits, review of judgments for tax purposes issued by public accountants.
       
      ■The case certified financial statements is necessary  
      The financial statements used to evaluate the performance of a company and as found at the time, are important for the application of financial formulas, statistics and comparisons party.
      There are several types of financial statements and balance sheets, income statements, cash flow statements and statements of shareholders' equity. The companies are required by law to disclose basic financial information from time to time. The financial statements warn investors about current threats to solvency and business objectives. The financial statements require banks to lend money to businesses.
       
      ■Penalty
      According to Article 41 of the Tax Code of the Federation people are obligated to provide declarations, notices and other documents, people that do not do so within the period prescribed in the tax provisions, authorities will require the presentation of the respective document to the appropriate offices, proceeding in simultaneous or sequential manner to perform one or more of the following acts:
      1- In the case of a default in filing a periodic statement for the payment of contributions either provisional or reports may give effect to the taxpayer or jointly liable incurred in the omission an amount equal to the contribution that would have determined the last or one of the last six statements. The amount payable shall be considered provisional payment and does not relieve required to submit the declaration omitted.
      2- Levy precautionary measure the goods or trading when the taxpayer has failed to submit returns in the last three years or when not attend three requirements of the authority in terms of section III.
      3- Imposing the fine corresponding to the terms of this code and require the presentation of the document issued. If you do not comply with the invitation fine will be imposed.
       

    • Adaption of IFRS

      ■What is the difference between IFRS and standard of accounting.

      Most countries have adopted IFRS, this is because they can modernize and achieve competitive financial markets.

      The problem with International Financial Reporting Standards (IFRS) is that there are different situations and specific cases between countries and markets. In these situations it is often difficult to apply international standards, which makes financial information reported losing accuracy and comparability. Similarly, there are significant differences between local standards and new international standards that can seriously affect the financial situation of a company when it comes to carrying out the adoption.[1]

      [1] Adopción de IFRS: El caso de México, Pablo Bernal Casar. Colegio de Contadores Públicos de México.

    • Inflation accounting

       Inflation is presented as an imbalance between total supply and total demand, which can be caused by insufficient supply relative to demand, or excess demand relative to supply.

      With inflation no equity wealth, sellers raise their prices. In the mechanisms of production new models economize costs and can follow up development of its product are devised. Expected inflation is when the institutions have already adapted to it and offset its effects; costs of inflation are only two types. You are called transaction costs, these are derivatives of the inconvenience of having to go frequently to financial institutions to get money to the desired real balances adjust to the loss in purchasing power driven by rising prices. The effects of unanticipated inflation on the economic system can be classified into two groups: Effects on the distribution of income and wealth effects on the allocation of productive resources.

      Some causes of inflation are speculative activities, hoarding and concealment of goods, high interest rates and poor channeling of bank credit, devaluation, inflation itself, insufficient agricultural production, excessive emission current, excessive profiteering by the traders price spiral.[1]

      [1] Conversión y Consolidación de Estados Financieros. Seminario; Importancia de la información financiera actualizada. Instituto Politécnico Nacional. Septiembre 2011.(págs. 25-27)

    • Problems and issue of Mexican’s accounting system

       Benefits;

      ·     [Facilitates both analysts and national and foreign investors, comparing financial information from Mexican companies with stations in other countries, thanks to the homogeneity will be achieved in the information contained in financial reports regarding the use in an increasingly large number of markets around the world.

      ·         Removes the additional costs represent prepare financial information under various accounting standards (for example, the country of origin of a broadcaster and countries where trading values).
      ·         Facilitates the preparation of consolidated financial statements in the case of economic groups that have a presence in several countries.
      ·         Facilitates the issuance of securities in the Mexican market by foreign stations, to accept as valid the financial statements prepared under the International Financial Reporting Standards.
       
      Disadvantages:
       
      ·         Information systems and financial accounting should be able to generate consistent and robust information to present under international financial reporting standards; they should also generate information on the depreciation of assets in compliance with IFRS, and capture new information required, such as segment information, fair values ​​of financial instruments and transactions with related parties disclosures. The notes to the consolidated financial statements prepared under IFRS require detailed, descriptive and quantitative information. As a result, companies should re-evaluate your existing systems and processes to ensure that they can provide all the information required under IFRS.
      ·         The adoption of international standards could have a significant impact on the financial statements and, therefore, tax liabilities. It is essential to carefully review the existing tax planning strategies, to ensure they continue to meet its objectives with the changes created by IFRS.
      ·         IFRS may cause major changes in reported earnings and various performance indicators. Therefore it is necessary to manage market expectations and educate analysts. The management of the entity must understand the differences that might arise in the way of perceiving the performance, both internally and in the market and agree on key messages to be transmitted to investors and other stakeholders. Reported earnings may differ from the perceived performance due to increased use of fair values ​​and new restrictions on existing practices. Consequently, it is necessary to report the appropriate information to evaluate correctly both business performance and the executive.][1]
       
      ■ Difference of review by Specialist
       
      ·         [Accounting clerks: sometimes considered only technical or employees, they perform some of the same daily tasks that accountants and CPAs do. Some work with independent small business in need of financial record keeping. Accountants keep daily accounting records, implementation of debits and credits, generating customer invoices and checks for suppliers. Lack of education of a CPA or CPC.
       
      ·         Accountants: They have a four-year college degree; they work with accounting clerks and technicians who deal with daily financial inputs. Accountants supervise or perform billing, ledger entries created, revised accounts payable activity completed by accountants or handle payroll. This is a mid-level position in the accounting department, they inform to accounting managers, people in charge of the business or financial managers, all of which can be certified public accountants.
       
      ·         Certified Public Accountants: They have an education focused on accounting and must pass the Uniform CPA examination. They must comply with public education and experience requirements prior to taking the exam. Accountants who do not meet these requirements cannot legally use the name CPA. A CPA can work within a company or start their own company to provide accounting services to the public. Certification is renewable every two years subject to state requirements. Because the CPA certification have a higher level of responsibility that the accountants to perform services of tax and financial audit for individuals, corporations, other companies or nonprofit organizations].[2]
       
      ■Selection of Accounting firm
      [As in Latin America, in Mexico the consulting industry is an element almost absent from the map of the knowledge economy.  With to volume, breadth and depth of services provided consultancy Mexico is a young industry in general. The consequences in terms of quality and finish projects, cost overruns and returns cannot be calculated. Customers find it difficult to understand what consultants do and therefore to use them well. Customers are inexperienced in recruitment, use and evaluation of service outcomes.
       
      Types of services
      A.   Standard Services for efficient solutions. This segment uses methodologies and well-established solutions, models and processes that allow consultants provide efficient services at competitive prices. The proposed sale to customers is "better, faster, and cheaper". Example: "Training Program use of technological applications for enterprise management system. "
       
      B.   Custom Services Custom Solutions. Customers in this segment
      They require more direct application protocol processes (Case A). Nevertheless they are seeking efficient and economical solutions. The companies operating in this segment they should have a broad base of knowledge of what options are available and have experience using to solve the specific problems of each particular client.
       
      C.   Special Services to solve complex problems.
      Customer has a complex and ill-defined problem. The customer has little or no experience in the field. The internship experience with this segment offer similar to customer technical problems and deep experience and knowledge specialized. Here, "quick diagnosis, vast experience and judgment" are critical for success.
       
      D.   Exceptional Solutions for new and unusual problems. Customer Success
      It depends on the outcome or solution of a new problem and / or unexpected beyond Deep experience and expertise. To provide innovative solutions, these practices offer diagnostic capabilities at the highest level, creativity and state of the art knowledge. This segment includes a very small number of practices. ][3]
       

      [1] http://direccionestrategica.itam.mx/impacto-de-la-adopcion-de-las-normas-internacionales-en-empresas-mexicanas-3/

      [3] Desarrollo de la Industria Consultora de Mexico: Direcciones Etsratégicas, Agenda de Acciones y Politica, Gian Enrico Casartelli, Diciembre 2010, Inter-American Development Bank.(pags 18-29)

    • Change in a law in 2014

      ■Electronization

      Electronic accounting refers to the obligation to keep records and accounting entries through electronic means and enter a monthly basis its accounting information through the website of the SAT.

       
      ■Electronic report of accounting date
      The accounting information will be integrated with monthly cuts in XML files with the detail of electronic accounts in accordance with the provisions Annex 24 of the Miscellaneous Tax Resolution 2015.
       
      ■Foundation of tax payer mail box
      The information is sent in compressed files zip format via mail or the Tax Procedures section of this Portal; sending electronic signature must be done with force
       
      ■Tax research
      The SAT is entitled to request banks a report on the amount of money that each of us paid to credit cards. In order to compare the report that the bank hand over the list to the SAT has with people who submitted their annual declaration and the amount of help Accumulator who reported as income.

    • Reinforcement of information registration

      ■Open a bank account

      For the opening of private accounts in Mexico, most banking institutions request the following documents:

      Corresponding -Contract.
      -Be over 18 years.
      -Proof of address
      -Fmm, M2, m3 (immigration document or any document issued by the Ministry of Foreign Affairs certifying the legal stay)
       
      ■Duty of financial
      The Tax Administration Service is an agency of the Secretariat of Finance and Public Credit has responsibility for implementing the fiscal and customs legislation, so that individuals and companies will contribute equally proportional and public spending; to audit taxpayers to comply with tax and customs regulations; facilitate and encourage voluntary compliance; and to generate and provide the necessary information for the design and evaluation of tax policy.
      Before the SAT individuals and companies have the obligation to register, keep their information updated for the RFC, create electronic invoices, keep records and make annual declarations plus paying taxes.
      Write about a client’s duty to the sat

      ■ Entrance of research
      The SAT can investigate physical and legal persons through banks, by asking for credit histories to compare them with annual declarations, in addition also investigates receipts and invoices issued by physical and legal entities.
       
      ■ Suggestion of Internet by SAT
      In relation to defaulted taxpayers it mentions that the SAT can;
      Check the name, corporate name and password of the RFC: 1. taxpayers who have strong tax credits; 2. due loans not paid or guaranteed; 3. canceled appropriations, 4. loans forgiven, and 5. taxpayers who have enforceable conviction for committing a tax crime.
       
      Background: Article 69 of the Federal Tax Code
      According to this the SAT publishes the name of defaulted taxpayers in its website.