A 2004 World Bank review of the accounting and auditing environment in Mexico concluded that although Mexican Generally Accepted Accounting Principles (GAAP) have been converging with International Financial Reporting Standards (IFRSs) over a number of years, accounting requirements still differ from the international standards. The World Bank noted, however, that the Council for Research and Development of Financial Information Standards (CINIF) was contemplating steps to further reduce the differences between Mexican and international requirements. In his presentation at the September 2007 World Standard Setters Meeting, CPC Felipe Perez Cervantes of the CINIF confirmed Mexico's commitment to converge its accounting practices with IFRSs . Cervantes noted that, having analyzed the different options to achieve convergence, it was decided that the most suitable way is to "adapt" existing standards by incorporating local legal or regulatory requirements. Thus Mexican Financial Reporting Standards are being gradually reviewed, reconciled with the international standards, and then reissued as the converged standards . As of 2007, the CINIF revised the conceptual framework which is effective since January 2006, and amended those standards that were significantly non-compliant with the new framework.

General Overview

A World Bank review of the accounting and auditing environment in Mexico led to the publication of a Report on the Observance of Standards and Codes (ROSC) in March 2004. International Financial Reporting Standards (IFRSs) (formerly known as International Accounting Standards, or IASs) and International Standards on Auditing were used as the benchmarks for assessing national standards. As explained in the ROSC, prior to 2004, accounting standards in Mexico were set by the Accounting Principles Committee of the Mexican Institute of Public Accountants (Instituto Mexicano de Contadores Publicos, or IMCP). The IMCP is a self-regulating organization that oversees the accounting profession in Mexico. It is authorized to issue auditing standards, conduct investigations, impose sanctions, and set ethics requirements. The IMCP is a member of the International Federation of Accountants (IFAC) and the International Accounting Standards Board (IASB). In June 2004, the standard-setting responsibilities were taken over by the Council for Research and Development of Financial Information Standards (Consejo Mexicano para la Investigacion y Desarrollo de Normas de Informacion Financiera, or CINIF), an independent nonprofit entity established on August 21, 2001 to conduct research toward setting accounting standards and to set national accounting standards in line with IFRSs.

The World Bank observed that although Mexican Generally Accepted Accounting Principles (GAAP) have been converging with IFRSs over a number of years, national accounting requirements still differ from IFRSs. The differences relate to accounting for inflation, preparation of cash flow statements, impairment, investments in associates, and financial instruments, among other issues. In the areas where no national requirements exist, the use of IFRSs is recommended. The World Bank notes, however, that the CINIF was contemplating steps to further reduce the differences between Mexican and international requirements. In his presentation at the September 2007 World Standard Setters Meeting, CPC Felipe Perez Cervantes of the CINIF confirmed Mexico's commitment to converge its accounting practices with IFRSs . He noted that it was decided that the most suitable way would be to "adapt" existing standards by incorporating the local legal, political, and cultural environment. Thus, Mexican Financial Reporting Standards (Normas de Informacion Financera, or NIF) are being gradually reviewed, reconciled with international standards, and then reissued as the converged standards . According to Cervantes, the CINIF inherited 38 standards from the IMCP, including 8 on the conceptual framework and 30 specific standards. The CINIF's revised conceptual framework has been effective since January 2006, and those standards that were significantly non-compliant with the new framework have been revised.

In Mexico, basic accounting requirements are stipulated in the Company Law (Ley General de Sociedades Mercantiles, or LGSM). Under the Securities Market Law (Ley de Mercado de Valores, or LMV) listed companies are required to prepare consolidated financial statements following the standards approved by the National Banking and Securities Commission (Comision Nacional Bancaria y de Valores, or CNBV). This, in turn, requires application of the accounting standards approved by the national standard-setter. Insurance companies must follow additional rules set by the National Insurance and Surety Commission (Comision Nacional de Seguros y Fianzas, or CNSF), while companies engaged in banking prepare financial statements in accordance with CNBV's circulars. As mentioned in the 2004 ROSC, the CNBV and CNSF's supplementary accounting requirements are perceived by the profession as different from the Mexican GAAP . Both the CNBV and the CNSF have established procedures to review financial statements of the regulated entities in order to enforce compliance with accounting and auditing requirements. Under the Securities Exchange Law, the CNBV is empowered to impose sanctions for the violation of the reporting requirements and may participate in their prosecution. Both organizations rely on external auditors to ensure compliance with accounting and auditing requirements.

The Principles

IFRS 1: First-time Adoption of International Financial Reporting Standards (effective 2006)

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There is insufficient publicly available information that addresses this principle.

IFRS 2: Share-based Payment (effective 2005)

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According to Cervantes (2007), Mexican Financial Reporting Standard D-8 Share-based payments was issued in 2007 and has been effective since January 1, 2008. However, there is insufficient publicly available information regarding compliance of this standard with the international equivalent.

IFRS 3: Business Combinations (effective 2004)

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According to Cervantes (2007), issuance of Mexican Financial Reporting Standard B-7 Business combinations was a near term project. No further information is publicly available.

IFRS 4: Insurance Contracts (effective 2006)

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There is insufficient publicly available information that addresses this principle.

IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (effective 2005)

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There is insufficient publicly available information that addresses this principle.

IFRS 6: Exploration for and Evaluation of Mineral Resources (effective 2006)

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There is insufficient publicly available information that addresses this principle.

IFRS 7: Financial Instruments: Disclosures (effective 2007)

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There is insufficient publicly available information that addresses this principle.

IAS 1: Presentation of Financial Statements (effective 2007)

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There is insufficient publicly available information that addresses this principle.

IAS 2: Inventories (effective 2005)

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According to Cervantes (2007), issuance of Mexican Financial Reporting Standard C-4 Inventories was a near term project. No further information is publicly available.

IAS 7: Cash Flow Statements (effective 1994)

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Mexican Financial Reporting Standard B-2 Statement of cash flow was issued in 2007 and has been effective since January 1, 2008. However, there is insufficient publicly available information regarding compliance of this standard with the international equivalent.

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 2005)

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According to Cervantes (2007), Mexican Financial Reporting Standard B-1 Accounting changes and corrections of an error has been effective since January 1, 2006. However, there is insufficient publicly available information regarding compliance of this standard with the international equivalent.

IAS 10: Events after the Reporting Period (effective 2005)

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According to Cervantes (2007), Mexican Financial Reporting Standard B-13 Events after the balance sheet date was issued in 2006 and has been effective since January 1, 2007. However, there is insufficient publicly available information regarding compliance of this standard with the international equivalent.

IAS 11: Construction Contracts (effective 1995)

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There is insufficient publicly available information that addresses this principle.

IAS 12: Income Taxes (effective 2001)

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According to Cervantes (2007), Mexican Financial Reporting Standard D-4 Taxes on income was issued in 2007 and has been effective since January 1, 2008. However, there is insufficient publicly available information regarding compliance of this standard with the international equivalent.

IAS 14: Segment Reporting (effective 1998)

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There is insufficient publicly available information that addresses this principle.

IAS 16: Property, Plant and Equipment (effective 2005)

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According to Cervantes (2007), issuance of Mexican Financial Reporting Standard C-6 Property, plant and equipment was a near term project. No further information is publicly available.

IAS 17: Leases (effective 2005)

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There is insufficient publicly available information that addresses this principle.

IAS 18: Revenue (effective 1995)

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According to Cervantes (2007), issuance of Mexican Financial Reporting Standard D-1 Revenue was a near term project. No further information is publicly available.

IAS 19: Employee Benefits (effective 2006)

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According to Cervantes (2007), Mexican Financial Reporting Standard D-3 Employee benefits was issued in 2007 and has been effective since January 1, 2008. However, there is insufficient publicly available information regarding compliance of this standard with the international equivalent.

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance (effective 1984)

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There is insufficient publicly available information that addresses this principle.

IAS 21: The Effects of Changes in Foreign Exchange Rates (effective 2005)

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According to Cervantes (2007), Mexican Financial Reporting Standard B-15 Recognition of the effects of changes in foreign currencies was issued in 2007 and has been effective since January 1, 2008. However, there is insufficient publicly available information regarding compliance of this standard with the international equivalent.

IAS 23: Borrowing Costs (effective 1995)

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According to Cervantes (2007), Mexican Financial Reporting Standard D-6 Capitalization of financing cost was issued in 2006 and has been effective since January 1, 2007. However, there is insufficient publicly available information regarding compliance of this standard with the international equivalent.

IAS 24: Related Party Disclosures (effective 2005)

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According to Cervantes (2007), Mexican Financial Reporting Standard C-13 Related parties was issued in 2006 and has been effective since January 1, 2007. However, there is insufficient publicly available information regarding compliance of this standard with the international equivalent.

IAS 26: Accounting and Reporting by Retirement Benefit Plans (effective 1998)

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There is insufficient publicly available information that addresses this principle.

IAS 27: Consolidated and Separate Financial Statements (effective 2005)

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According to Cervantes (2007), issuance of Mexican Financial Reporting Standard B-8 Consolidated and separate financial statements was a near term project. No further information is publicly available.

IAS 28: Investments in Associates (effective 2005)

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According to Cervantes (2007), issuance of Mexican Financial Reporting Standard C-7 Investment in associates was a near term project. No further information is publicly available.

IAS 29: Financial Reporting in Hyperinflationary Economies (effective 1990)

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According to Cervantes (2007), Mexican Financial Reporting Standard B-10 Recognition of the effects of inflation was issued in 2007 and has been effective since January 1, 2008. However, there is insufficient publicly available information regarding compliance of this standard with the international equivalent.

IAS 31: Interests in Joint Ventures (effective 2005)

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There is insufficient publicly available information that addresses this principle.

IAS 32: Financial Instruments: Disclosure and Presentation (effective 2005)

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There is insufficient publicly available information that addresses this principle.

IAS 33: Earnings per Share (effective 2005)

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There is insufficient publicly available information that addresses this principle.

IAS 34: Interim Financial Reporting (effective 1999)

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There is insufficient publicly available information that addresses this principle.

IAS 36: Impairment of Assets (effective 2004)

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The 2004 World Bank assessment noted that "Bulletin C-15 does not use the concept of recoverable amount in the same way as IAS for calculating impairment loss on long-term assets to be disposed" (p. 12). However, at the time of the assessment, an exposure draft was under preparation that was expected to eliminate this difference. No further information on Mexico's compliance with this principle is publicly available.

IAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1999)

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There is insufficient publicly available information that addresses this principle.

IAS 38: Intangible Assets (effective 2004)

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There is insufficient publicly available information that addresses this principle.

IAS 39: Financial Instruments: Recognition and Measurement (effective 2006)

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The 2004 World Bank assessment noted that "Mexican GAAP does not provide specific rules relating to hedge effectiveness, so hedge accounting is permitted more widely than under IAS. Also, there are no rules under Bulletin C-2 relating to changes of classification of financial assets, transfer of receivables, etc." (p. 12). However, at the time of the assessment an exposure draft was under preparation that was expected to eliminate this difference. No further information on Mexico's compliance with this principle is publicly available.

IAS 40: Investment Property (effective 2005)

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There is insufficient publicly available information that addresses this principle.

IAS 41: Agriculture (effective 2003)

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There is insufficient publicly available information that addresses this principle.