The system used in Mexico to quantify the financial situation and the results of the operations of the companies is a dual update process, in which it is possible to select, for the updating of inventories and tangible fixed assets, in method of "Adjustments for changes in the general price level" or "Updating of specific costs", which allows, depending on the needs and characteristics of the company in particular, to obtain more meaningful and useful information.
The Instituto Mexicano de Contadores Públicos, AC, through its accounting principles commission, issued in June 1983 Bulletin B-10, “Recognizing the effects of inflation on financial information”.
Later, two years later, in October 1985, some norms and guidelines to improve its operation were incorporated into bulletin B-10, published in circulars Nos. 25 and 26, collected by a document called "Adjustments to Bulletin B-10" that contains normative provisions that must be observed in the context of the cited bulletin.
In January 1987, circular No. 28 was issued “recommendations for comparability purposes in an inflationary environment” and, finally, in October of the same year, a second document of adjustments was added in which the treatment of monetary utility was modified. It deals with comparability in the financial statements of previous periods and additional information is required regarding the original historical cost of non-monetary items.
Starting in 1989, after an inflation for two years greater than 100% and a last one of more than 50% and in order to obtain comparability of the financial statements over time, a third document of adjustments to Bulletin B-10 is issued. that regulates:
a).- Expression of the financial statements in pesos of the same purchasing power.
In order to improve the comparability of the main financial statements, they must be expressed in the currency of the same purchasing power.
All states must be expressed in currency of the same purchasing power.
b).- Restatement of the income statement for the current year.
The income statement must be expressed in the currency of the same purchasing power as the statement of financial position, that is, in the purchasing power currency of the year-end date (before this adjustment in the statement it is presented in pesos of average purchasing power per year)
c).- Comparability of financial statements over time.
When comparative financial statements are presented, they must be expressed in pesos of the purchasing power of the closing of the last reported fiscal year.
The possibility of presenting, through notes to the financial statements, restated information from previous periods is eliminated, since it is considered that its content is very limited, as well as presenting information in nominal pesos due to the confusion that it may cause in the user.
d).- Presentation of the concepts of stockholders' equity in the balance sheet.
The updating of stockholders' equity must be distributed among the different items that comprise it so that each one is made up of the sum of its nominal value and its respective update. For legal or other reasons that require information on nominal values, it may be disclosed additionally.
In the financial statements, it must be disclosed that all the information is expressed in pesos of purchasing power as of the closing date of the last fiscal year. In January 1992, the fourth adjustment document was issued, repealing the obligation to calculate and, where appropriate, provide the technical and equilibrium parity.
The fifth document of adjustments to the B-10 is issued in principle effective as of January 1, 1996.
In order to achieve greater comparability in the financial statements and for reasons of objectivity and impartiality in the information, in this bulletin the Mexican Institute of Public Accountants establishes a single method - that of adjustments due to changes in the general price level - for the updating of inventories and cost of sales, property, machinery and equipment and their corresponding accumulated depreciation for the period.
This bulletin therefore establishes that the use of the specific costs method related to assets should be discontinued, and the specific costs related to assets may be disclosed in the notes to the financial statements, when the company decides to continue using this method.
In March 1996 an addendum to this fifth document of adjustments was published, deferring its application from the 1st. January 1997.
Finally, this fifth document of adjustments, practically did not enter into force, since it was replaced and eliminated by the “Fifth document of adjustments (modified) that entered into force as of January 1, 1997.
After several controversies, it was concluded that the specific cost method effectively violates the principle of original historical value, does not maintain the objectivity of the information because it makes it impossible to test in a practical and safe way the parameters used to update the restated items under This method, in addition to being a method that cannot be applied to all the items that make up the financial statements.
And finally, it is not congruent with international regulations.
In the fifth document of adjustments (modified), the method of adjustments due to changes in the general price level is confirmed as a general rule, since it is the one that best adheres to the concept of "original historical cost", the basis of international principles. most recognized.
However, the option of using replacement costs is allowed to recognize the effects of inflation on inventories and costs of sales, as well as specific indexation for machinery and equipment and its depreciation, under certain rules, basically when its acquisition cost is clearly identified with another currency.
