Accounting Policies
The principal accounting policies followed by the Group and used in the preparation of its annual consolidated financial statements as of
December 31, 2020, and where applicable, of its interim condensed consolidated financial statements, are summarized below. These accounting policies should be read in conjunction with the audited consolidated financial statements of the
Group for the years ended December 31, 2020 and 2019, once they have been submitted to the Mexican Banking and Securities Commission (“Comisión Nacional Bancaria y de Valores” and the U.S. Securities and Exchange Commission, respectively).
(a) Basis of Presentation
The consolidated financial statements of the Group as of December 31, 2020 and 2019, and for the years ended December 31, 2020, 2019 and 2018,
are presented in accordance with International Financial Reporting Standards (“IFRS Standards”), as issued by the International Accounting Standards Board (“IASB”). IFRS Standards comprise: (i) IFRS Standards; (ii) International Accounting
Standards (“IAS Standards”); (iii) IFRS Interpretations Committee (“IFRIC”) Interpretations; and (iv) Standing Interpretations Committee (“SIC”) Interpretations.
The consolidated financial statements have been prepared on a historical cost basis, except for the measurement at fair value of derivative
financial instruments, financial assets, investments in equity financial instruments, plan assets of post-employment benefits and share-based payments, as described in the notes to the financial statements below.
The preparation of consolidated financial statements in conformity with IFRS Standards, requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. Changes in assumptions may have a significant impact on the consolidated financial statements in the period the
assumptions changed. Management believes that the underlying assumptions are appropriate. The areas involving a higher degree of judgment or complexity, or areas where estimates and assumptions are significant to the Group’s financial
statements are disclosed in Note 5 to these consolidated financial statements.
These consolidated financial statements were authorized for issuance on March 31, 2021 by the Group’s Corporate Vice President of Finance.
(b) Consolidation
The financial statements of the Group are prepared on a consolidated basis and include the assets, liabilities and results of operations of all
companies in which the Company has a controlling interest (subsidiaries). All intercompany balances and transactions have been eliminated from the consolidated financial statements.
Subsidiaries
Subsidiaries are all entities over which the Company has control. The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The existence and effects of potential voting rights that are currently exercisable or convertible are considered
when assessing whether or not the Company controls another entity. The subsidiaries are consolidated from the date on which control is obtained by the Company and cease to consolidate from the date on which said control is lost.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary
is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group
recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest
over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in income or loss.
Changes in Ownership Interests in Subsidiaries without Change of Control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions that is, as
transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the interest acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on
disposals of non-controlling interests are also recorded in equity.
Loss of Control of a Subsidiary
When the Company ceases to have control of a subsidiary, any retained interest in the entity is remeasured to its fair value at the date when
control is lost, with the change in carrying amount recognized in income or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or
financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This means that amounts
previously recognized in other comprehensive income are reclassified to income or loss except for certain equity financial instruments designated irrevocably with changes in other comprehensive income or loss.
At December 31, 2020 and 2019, the main direct and indirect subsidiaries of the Company were as follows:
|
Subsidiaries
|
Company’s
Ownership
Interest (1)
|
|
Business
Segment (2)
|
|
Empresas Cablevisión, S.A.B. de C.V. and subsidiaries (collectively, “Empresas Cablevisión”) (3)
|
51.2%
|
|
Cable
|
|
Subsidiaries engaged in the Cablemás business (collectively, “Cablemás”) (4)
|
100%
|
|
Cable
|
|
Televisión Internacional, S.A. de C.V. and subsidiaries (collectively, “TVI”) (5)
|
100%
|
|
Cable
|
|
Cablestar, S.A. de C.V. and subsidiaries (collectively, “Bestel”) (6)
|
66.2%
|
|
Cable
|
|
Arretis, S.A.P.I. de C.V. and subsidiaries (collectively, “Cablecom”) (7)
|
100%
|
|
Cable
|
|
Subsidiaries engaged in the Telecable business (collectively, “Telecable”) (8)
|
100%
|
|
Cable
|
|
FTTH de México, S.A. de C.V. (9)
|
100%
|
|
Cable
|
|
Corporativo Vasco de Quiroga, S.A. de C.V. (“CVQ”) and subsidiaries (10)
|
100%
|
|
Cable and Sky
|
|
Innova, S. de R.L. de C.V. (“Innova”) and subsidiaries (collectively, “Sky”) (11)
|
58.7%
|
|
Sky
|
|
Grupo Telesistema, S.A. de C.V. (“Grupo Telesistema”) and subsidiaries
|
100%
|
|
Content and Other Businesses
|
|
Televisa, S.A. de C.V. (“Televisa”) (12)
|
100%
|
|
Content
|
|
Televisión Independiente de México, S.A. de C.V. (“TIM”) (12)
|
100%
|
|
Content
|
|
G.Televisa-D, S.A. de C.V. (12)
|
100%
|
|
Content
|
|
Multimedia Telecom, S.A. de C.V. (“Multimedia Telecom”) and subsidiary (13)
|
100%
|
|
Content
|
|
Ulvik, S.A. de C.V. (14)
|
100%
|
|
Content and Other Businesses
|
|
Controladora de Juegos y Sorteos de México, S.A. de C.V. and subsidiaries
|
100%
|
|
Other Businesses
|
|
Editorial Televisa, S.A. de C.V. and subsidiaries
|
100%
|
|
Other Businesses
|
|
Grupo Distribuidoras Intermex, S.A. de C.V. and subsidiaries
|
100%
|
|
Other Businesses
|
|
Villacezán, S.A. de C.V. (“Villacezán”) and subsidiaries (15)
|
100%
|
|
Other Businesses
|
|
Sistema Radiópolis, S.A. de C.V. (“Radiópolis”) and subsidiaries (16)
|
—
|
|
Disposed operations
|
|
(1)
|
Percentage of equity interest directly or indirectly held by the Company.
|
|
|
|
|
(2)
|
See Note 26 for a description of each of the Group’s business segments.
|
|
|
|
|
(3)
|
Empresas Cablevisión, S.A.B. de C.V., is a direct majority-owned subsidiary of CVQ.
|
|
|
|
|
(4)
|
Some Cablemás subsidiaries are directly owned by CVQ and some other Cablemás subsidiaries are indirectly owned by CVQ.
|
|
|
|
|
(5)
|
Televisión Internacional, S.A. de C.V., is a direct subsidiary of CVQ.
|
|
|
|
|
(6)
|
Cablestar, S.A. de C.V., is an indirect majority-owned subsidiary of CVQ and Empresas Cablevisión, S.A.B. de C.V.
|
|
|
|
|
(7)
|
Arretis, S.A.P.I. de C.V., is a direct subsidiary of CVQ.
|
|
(8)
|
The Telecable subsidiaries are directly owned by CVQ.
|
|
|
|
|
(9)
|
FTTH de México, S. A. de C.V., is an indirect subsidiary of CVQ.
|
|
|
|
|
(10)
|
CVQ is a direct subsidiary of the Company and the parent company of Empresas Cablevisión, Cablemás, TVI, Bestel, Cablecom, Telecable and Innova.
|
|
|
|
|
(11)
|
Innova is an indirect majority-owned subsidiary of the Company, CVQ and Sky DTH, S.A. de C.V. (“Sky DTH”), and a direct majority-owned subsidiary of Innova Holdings, S. de R.L.
de C.V. (“Innova Holdings”). Sky is a satellite television provider in Mexico, Central America and the Dominican Republic. Although the Company holds a majority of Innova’s equity and designates a majority of the members of
Innova’s Board of Directors, the non-controlling interest has certain governance and veto rights in Innova, including the right to block certain transactions between the companies in the Group and Sky. These veto rights are
protective in nature and do not affect decisions about relevant business activities of Innova.
|
|
|
|
|
(12)
|
Televisa, TIM and G.Televisa-D, S.A. de C.V., are direct subsidiaries of Grupo Telesistema.
|
|
|
|
|
(13)
|
Multimedia Telecom and its direct subsidiary, Comunicaciones Tieren, S.A. de C.V. (“Tieren”), are indirect wholly-owned subsidiaries of Grupo Telesistema, through which the
Company owns shares of the capital stock of UHI and maintained through December 29, 2020, an investment in warrants that were exercised for shares of common stock of UHI on that date. As of December 31, 2020, and 2019, Multimedia
Telecom and Tieren have investments representing 95.3% and 4.7%, respectively, of the Group’s aggregate investment in shares of common stock and/or share warrants issued by UHI (see Notes 9, 10 and 20).
|
|
|
|
|
(14)
|
Direct subsidiary through which we conduct certain operations of our Content segment and certain operations of our Other Businesses segments.
|
|
|
|
|
(15)
|
Villacezán is an indirect subsidiary of Grupo Telesistema.
|
|
|
|
|
(16)
|
In July 2020, the Company concluded the sale of its 50% equity interest in Radiópolis. Through June 2020, Radiópolis was a direct subsidiary of the Company through which the
Group conducted the operations of its former Radio business. The Company controlled Radiópolis as it had the right to appoint the majority of the members of the Board of Directors of Radiópolis. The Radio business was part the of
the Group’s Other Businesses segment through the third quarter of 2019. Beginning in the fourth quarter of 2019, the assets and related liabilities of the Radio Business, as well as its operating results, were classified as held
for sale in the Group’s consolidated financial statements through June 30, 2020 (see Notes 3 and 26).
|
The Group’s Cable, Sky and Content segments, require governmental concessions and special authorizations for the provision of broadcasting and
telecommunications services in Mexico. Such concessions are granted by the Mexican Institute of Telecommunications (“Instituto Federal de Telecomunicaciones” or “IFT”) for a fixed term, subject to renewal in accordance with the Mexican
Telecommunications and Broadcasting Law (“Ley Federal de Telecomunicaciones y Radiodifusión” or “LFTR”).
Renewal of concessions for the Content segment (Broadcasting) require, among others: (i) to request such renewal to IFT prior to the last fifth
period of the fixed term of the related concession; (ii) to be in compliance with the concession holder’s obligations under the LFTR, other applicable regulations, and the concession title; (iii) a declaration by IFT that there is no public
interest in recovering the spectrum granted under the related concession; and (iv) the acceptance by the concession holder of any new conditions for renewing the concession as set forth by IFT, including the payment of a related fee. IFT
shall resolve within the year following the presentation of the request, if there is public interest in recovering the spectrum granted under the related concession, in which case it will notify its determination and proceed with the
termination of the concession at the end of its fixed term. If IFT determines that there is no public interest in recovering the spectrum, it will grant the requested extension within 180 business days, provided that the concessionaire
accepts, in advance, the new conditions set by IFT, which will include the payment of the fee referred to above. Such fee will be determined by IFT for the relevant concessions, considering the following elements: (i) the frequency band;
(ii) the amount of spectrum; (iii) coverage of the frequency band; (iv) domestic and international benchmark regarding the market value of frequency bands; and (v) upon request of IFT, an opinion issued by the Ministry of Finance and Public
Credit of IFT´s proposal for calculation of the fee.
Renewal of concessions for the Sky and Cable segments require, among others: (i) to request its renewal to IFT prior to the last fifth period of
the fixed term of the related concession; (ii) to be in compliance with the concession holder’s obligations under the LFTR, other applicable regulations, and the concession title; and (iii) the acceptance by the concession holder of any new
conditions for renewing the concession as set forth by IFT. IFT shall resolve any request for renewal of the telecommunications concessions within 180 business days of its request. Failure to respond within such period of time shall be
interpreted as if the request for renewal has been granted.
The regulations of the broadcasting and the telecommunications concessions (including satellite pay TV) establish that at the end of the
concession, the frequency bands or spectrum attached to the services provided in the concessions shall return to the Mexican government. In addition, at the end of the concession, the Mexican government will have the preferential right to
acquire infrastructure, equipment and other goods directly used in the provision of the concession. If the Mexican government were to exercise its right to acquire infrastructure, equipment and other goods, it would be required to pay a
price that is equivalent to a formula that is similar to fair value. To the knowledge of the Company’s management, no spectrum granted for broadcasting services in Mexico has been recovered by the Mexican government in at least the past
three decades for public interest reasons. However, the Company’s management is unable to predict the outcome of any action by IFT in this regard. In addition, these assets, by themselves, would not be enough to immediately begin
broadcasting or offering satellite pay TV services or telecommunications services, as no content producing assets or other equipment necessary to operate the business would be included.
Also, the Group’s Gaming business, which is reported in the Other Businesses segment, requires a permit granted by the Mexican Federal
Government for a fixed term, subject to renewal in accordance with Mexican law. Additionally, the Group’s Sky businesses in Central America and the Dominican Republic require concessions or permits granted by local regulatory authorities
for a fixed term, subject to renewal in accordance with local laws.
The accounting guidelines provided by IFRIC 12 Service Concession Arrangements, are not applicable to
the Group due primarily to the following factors: (i) the Mexican government does not substantially control the Group’s infrastructure, what services are provided with the infrastructure and the price at which such services are offered;
(ii) the Group’s broadcasting service does not constitute a public service as per the definition in IFRIC 12; and (iii) the Group is unable to divide its infrastructure among the public (telephony and possibly Internet services) and
non-public (pay TV) service components.
At December 31, 2020, the expiration dates of the Group’s concessions and permits were as follows:
|
Segments
|
|
Expiration Dates
|
|
Cable
|
|
Various from 2022 to 2048
|
|
Sky
|
|
Various from 2021 to 2030
|
|
Content (broadcasting concessions) (1)
|
|
In 2021 and the relevant renewals start in 2022 ending in 2042
|
|
|
|
|
|
Other Businesses:
|
|
|
|
Gaming
|
|
In 2030
|
|
(1)
|
In November 2018, the IFT approved the renewal of the Group’s broadcasting concessions for all of its
television stations in Mexico, for a term of 20 years after the existing expiration date in 2021. In November 2018, the Group paid for such renewal an aggregate amount of Ps.5,754,543 in cash, which included a payment of
Ps.1,194 for administrative expenses and recognized this payment as an intangible asset in its consolidated statement of financial position. This amount will be amortized in a period of 20 years beginning on January 1, 2022,
by using the straight-line method (see Note 13).
|
The concessions or permits held by the Group are not subject to any significant pricing regulations in the ordinary course of business.
(c) Investments in Associates and Joint Ventures
Associates are those entities over which the Group has significant influence but not control or joint control, generally those entities with a
shareholding of between 20% and 50% of the voting rights. Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. Joint ventures are
those joint arrangements where the Group exercises joint control with other stockholder or more stockholders without exercising control individually, and have rights to the net assets of the joint arrangements. Investments in associates and
joint ventures are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the net
assets of the investee after the date of acquisition.
The Group’s investments in associates include an equity interest in UHI represented by approximately 35.9% and 10% of the outstanding total
shares of UHI as of December 31, 2020 and 2019, respectively (see Notes 9 and 10).
If the Group’s share of losses of an associate or a joint venture equals or exceeds its interest in the investee, the Group discontinues
recognizing its share of further losses. The interest in an associate or a joint venture is the carrying amount of the investment in the investee under the equity method together with any other long-term investment that, in substance, form
part of the Group’s net investment in the investee. After the Group’s interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the associate or joint venture.
(d) Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Group’s Co-Chief Executive Officers (“chief
operating decision makers”) who are responsible for allocating resources and assessing performance for each of the Group’s operating segments.
(e) Foreign Currency Translation
Functional and Presentation Currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment
in which the entity operates (“functional currency”). The presentation and reporting currency of the Group’s consolidated financial statements is the Mexican peso, which is used for compliance with its legal and tax obligations.
Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions
or measurement where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognized in the statement of income as part of finance income or expense, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.
Changes in the fair value of monetary securities denominated in foreign currency classified as investments in financial instruments are analyzed
between exchange differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortized cost are recognized in income or
loss, and other changes in carrying amount are recognized in other comprehensive income or loss.
Translation of Foreign Operations
The financial statements of the Group’s foreign entities that have a functional currency different from the presentation
currency are translated into the presentation currency as follows: (a) assets and liabilities are translated at the closing rate at the date of the statement of financial position; (b) income and expenses are translated at average exchange
rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); (c)
stockholders' equity accounts are translated at the prevailing exchange rate at the time capital contributions were made and earnings were generated and (d) all resulting translation differences are recognized in other comprehensive income
or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate. Translation differences arising are recognized in other comprehensive income or loss.
Assets and liabilities in foreign currencies of non-Mexican subsidiaries that use the Mexican Peso as a functional currency are initially
converted to Mexican Pesos by utilizing the exchange rate of the statement of financial position date for monetary assets and liabilities, and historical exchange rates for non-monetary items, with the related adjustment included in the
consolidated statement of income as finance income or expense.
A portion of the Group’s outstanding principal amount of its U.S. dollar denominated long-term debt (hedging instrument, disclosed in the line
item “Long-term debt, net of current portion” of the consolidated statement of financial position) has been designated as a hedge of a net investment in a foreign operation in connection with the Group’s investment in shares of common stock
of UHI (hedged item), which amounted to U.S.$1,074.0 million (Ps.21,424,180) and U.S.$433.7 million (Ps.8,189,662) as of December 31, 2020 and 2019, respectively. Consequently, any foreign exchange gain or loss attributable to this
designated hedging long-term debt is credited or charged directly to other comprehensive income or loss as a cumulative result from foreign currency translation (see Note 10).
A portion of the Group’s outstanding principal amount of its U.S. dollar denominated long-term debt (hedging instrument, disclosed in the line item “Long-term debt, net of current portion” of the consolidated statement of financial position) was designated as a fair value hedge of foreign exchange exposure related to its investment in warrants that
were exercisable for common stock of UHI (hedged item) through December 29, 2020, the date on which the Group exercised all of these warrants for common stock of UHI, which amounted to Ps.17,387,699 (U.S.$871.6 million) as of December 29,
2020 and Ps.33,775,451 (U.S.$1,788.6 million) as of December 31, 2019. Consequently, any foreign exchange gain or loss attributable to this designated hedging long-term debt was credited or charged directly to other comprehensive income or
loss through December 29, 2020, along with the recognition in the same line item of any foreign currency gain or loss of this investment in warrants designated as a hedged item through that date (see Notes 9, 14 and 18).
A portion of the Group’s outstanding principal amount of its U.S. dollar denominated long-term debt (hedging instrument, disclosed in the line
item “Long-term debt, net of current portion” of the consolidated statement of financial position) has been designated as a fair value hedge of foreign exchange exposure related to its investment in Open-Ended Fund (hedged item), which
amounted to Ps.1,135,803 (U.S.$56.9 million) and Ps.4,688,202 (U.S.$248.3 million), as of December 31, 2020 and 2019, respectively. Consequently, any foreign exchange gain or loss attributable to this designated hedging long-term debt is
credited or charged directly to other comprehensive income or loss, along with the recognition in the same line item of any foreign currency gain or loss of this investment in Open-Ended Fund designated as a hedged item (see Notes 9, 14 and
18).
Beginning on January 1, 2018, the Group adopted the hedge accounting requirements of IFRS 9 Financial
Instruments (“IFRS 9”) for all of its hedging relationships. This IFRS Standard became effective on that date.
(f) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and all highly liquid investments with an original maturity of three months or less at the
date of acquisition. Cash is stated at nominal value and cash equivalents are measured at fair value, and the changes in the fair value are recognized in the statement of income.
As of December 31, 2020 and 2019, cash equivalents primarily consisted of fixed short-term deposits and corporate fixed income securities
denominated in U.S. dollars and Mexican pesos, with an average yield of approximately 0.38% for U.S. dollar deposits and 5.40% for Mexican peso deposits in 2020, and approximately 2.20% for U.S. dollar deposits and 8.09% for Mexican peso
deposits in 2019.
(g) Transmission Rights and Programming
Programming is comprised of programs, literary works, production talent advances and films.
Transmission rights and literary works are valued at the lesser of acquisition cost and net realizable value. Programs and films are valued at
the lesser of production cost, which consists of direct production costs and production overhead, and net realizable value. Payments for production talent advances are initially capitalized and subsequently included as direct or indirect
costs of program production. Transmission rights are recognized from the point of which the legally enforceable license period begins. Until the license term commences and the programming rights are available, payments made are recognized
as prepayments.
The Group’s policy is to capitalize the production costs of programs which benefit more than one annual period and amortize them over the
expected period of future program revenues based on the Company’s historical revenue patterns and usage for similar productions.
Transmission rights, programs, literary works, production talent advances and films are recorded at acquisition or production cost. Cost of
sales is calculated and recorded for the month in which such transmission rights, programs, literary works, production talent advances and films are matched with related revenues.
Transmission rights are recognized in income over the lives of the contracts. Transmission rights in perpetuity are amortized on a straight-line
basis over the period of the expected benefit as determined by past experience, but not exceeding 25 years.
(h) Inventories
Inventories of paper, magazines, materials and supplies for maintenance of technical equipment are recorded at the lower of cost or its net
realization value. The net realization value is the estimated selling price in the normal course of business, less estimated costs to conduct the sale. Cost is determined using the average cost method.
(i) Financial Assets
Beginning on January 1, 2018, the Group classifies its financial assets in accordance with IFRS 9 which became effective on that date. Under the
guidelines of IFRS 9, the Group classifies financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or loss (“FVOCIL”), or fair value through income or loss (“FVIL”), based on the Company’s
business model for managing the financial assets and the contractual cash flows characteristics of the financial asset.
Financial Assets Measured at Amortized Cost
Financial assets are measured at amortized cost when the objective of holding such financial assets is to collect contractual cash flows, and
the contractual terms of the financial asset give rise on specified dates to cash flows that are only payments of principal and interest on the principal amount outstanding. These financial assets are initially recognized at fair value plus
transaction costs and subsequently carried at amortized cost using the effective interest rate method, with changes in carrying value recognized in the consolidated statement of income in the line which most appropriately reflects the
nature of the item or transaction. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period that are included in non-current assets. The Group’s financial assets measured at
amortized costs are primarily presented as “trade notes and accounts receivable”, “other accounts and notes receivable”, and “due from related parties” in the consolidated statement of financial position (see Note 7).
Financial Assets Measured at FVOCIL
Financial assets are measured at FVOCIL when the objective of holding such financial assets is both collecting contractual cash flows and
selling financial assets, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
The Group’s investments in certain equity instruments have been designated to be measured at FVOCIL, as permitted by IFRS 9 (see Note 28). In
connection with this designation, any amounts presented in consolidated other comprehensive income are not subsequently transferred to consolidated income. Dividends from these equity instruments are recognized in consolidated income when
the right to receive payment of the dividend is established, and such dividend is probable to be paid to the Group.
Financial Assets at FVIL
Financial assets at FVIL are financial assets held for trading. A financial asset is classified in this category if acquired principally for the
purpose of selling in the short term. Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise
they are classified as non-current.
Impairment of Financial Assets
From January 1, 2018, the Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at
fair value through other comprehensive income or loss. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized
from initial recognition of the receivables (see Note 7).
Offsetting of Financial Instruments
Financial assets are offset against financial liabilities and the net amount reported in the consolidated statement of financial position if,
and only when the Group: (i) currently has a legally enforceable right to set off the recognized amounts; and (ii) intends either to settle on a net basis, or to realize the assets and settle the liability simultaneously.
(j) Property, Plant and Equipment
Property, plant and equipment are recorded at acquisition cost.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to income or
loss during the financial period in which they are incurred.
Land is not depreciated. Depreciation of property, plant and equipment is based upon the carrying value of the assets in use and is computed
using the straight-line method over the estimated useful lives of the asset, as follows:
|
|
Estimated
Useful Lives
|
|
|
Buildings
|
20-65 years
|
|
|
Building improvements
|
5-20 years
|
|
|
Technical equipment
|
3-30 years
|
|
|
Satellite transponders
|
15 years
|
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Furniture and fixtures
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3-10 years
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Transportation equipment
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4-8 years
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Computer equipment
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3-6 years
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Leasehold improvements
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5-30 years
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The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within other income or
expense in the consolidated statement of income.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items
(major components) of property, plant and equipment.
(k) Right-of-use Assets
Right-of-use assets are measured at cost comprising the following: the amount of the initial measurement of lease liability, any lease payments
made at or before the commencement date less any lease incentives received, any initial direct costs and restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight – line basis. If the
Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.
Payments associated with short-term leases of equipment and vehicles and mostly leases of low-value assets are recognized on a straight-line
basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
(l) Intangible Assets and Goodwill
Intangible assets and goodwill are recognized at acquisition cost. Intangible assets and goodwill acquired through business combinations are
recorded at fair value at the date of acquisition. Intangible assets with indefinite useful lives, which include, trademarks, concessions, and goodwill, are not amortized, and subsequently recognized at cost less accumulated impairment
losses. Intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives, as follows:
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Estimated
Useful Lives
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Trademarks with finite useful lives
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4 years
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Licenses
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3-10 years
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Subscriber lists
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4-5 years
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Payments for renewal of concessions
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20 years
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Other intangible assets
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3-20 years
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Trademarks
The Group determines its acquired trademarks to have an indefinite life when they are expected to generate net cash inflows for the Group
indefinitely. Additionally, the Group considers that there are no legal, regulatory or contractual provisions that limit the useful lives of trademarks. The Group has not capitalized any amounts associated with internally developed
trademarks.
Concessions
The Group defined concessions to have an indefinite life due to the fact that the Group has a history of renewing its concessions upon
expiration, has maintained the concessions granted by the Mexican government, and has no foreseeable limit to the period over which the assets are expected to generate net cash inflows. In addition, the Group is committed to continue to
invest for the long term to extend the period over which the broadcasting and telecommunications concessions are expected to continue to provide economic benefits.
Any fees paid by the Group to regulatory authorities for concessions renewed are determined to have finite useful lives and are amortized on a
straight-live basis over the fixed term of the related concession.
Goodwill
Goodwill arises on the acquisition of a business and represents the excess of the consideration transferred over the Group’s interest in net
fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (“CGUs”),
or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for
internal management purposes.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment.
The carrying value of goodwill is compared to the recoverable amount, which is the higher between the value in use and the fair value less costs to sell. Any impairment of goodwill is recognized as an expense in the consolidated statement
of income and is not subject to be reversed in subsequent periods.
(m) Impairment of Long-lived Assets
The Group reviews for impairment the carrying amounts of its long-lived assets, tangible and intangible, including goodwill (see Note 13), at
least once a year, or whenever events or changes in business circumstances indicate that these carrying amounts may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. To determine whether an impairment exists, the carrying value of the reporting unit is compared with its recoverable
amount. Fair value estimates are based on quoted market values in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including discounted value of
estimated future cash flows, market multiples or third-party appraisal valuations. Any impairment of long-lived assets other than goodwill may be subsequently reversed under certain circumstances.
(n) Trade Accounts Payable and Accrued Expenses
Trade accounts payable and accrued expenses are obligations to pay for goods or services that have been acquired in the ordinary course of
business from suppliers. Trade accounts payable and accrued expenses are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as
non-current liabilities.
Trade accounts payable and accrued expenses are recognized initially at fair value and subsequently measured at amortized cost using the
effective interest method.
Trade accounts payable and accrued expenses are presented as a single item of consolidated current liabilities in the consolidated statements of
financial position as of December 31, 2020 and 2019.
(o) Debt
Debt is recognized initially at fair value, net of transaction costs incurred. Debt is subsequently carried at amortized cost; any difference
between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement of income over the period on which the debt is outstanding using the effective interest method.
Fees paid on the establishment of debt facilities are recognized as transaction costs of the loan to the extent that it is probable that some or
all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a
pre-payment for liquidity services and amortized over the period of the facility to which it relates.
Current portion of long-term debt and interest payable are presented as a separate line item in the consolidated statements of financial
position as of December 31, 2020 and 2019.
Debt early redemption costs are recognized as finance expense in the consolidated statement of income.
(p) Customer Deposits and Advances
Customer deposits and advance agreements for advertising services provide that customers receive prices that are fixed for the contract period
for advertising time in the Group’s platforms based on rates established by the Group. Such rates vary depending on when the advertisement is made, including the season, hour, day and type of programming.
The Group recognizes customer deposits and advance agreements for advertising services in the consolidated statement of financial position when
these agreements are executed either with a consideration in cash paid by customers or with short-term non-interest bearing notes received from customers in connection with annual (“upfront basis”) and from time to time (“scatter basis”)
prepayments (see Note 7). In connection with the initial adoption of IFRS 15 Revenues from Contracts with Customers (“IFRS 15”) in the first quarter of 2018 (see Note 2 (s)), customer deposits and
advances agreements are presented by the Group as a contract liability in the consolidated statement of financial position when a customer pays consideration, or the Group has a right to an amount of consideration that is unconditional,
before the Group transfers services to the customer. Under the guidelines of this standard, a contract liability is a Group’s obligation to transfer services or goods to a customer for which the Group has received consideration, or an
amount of consideration is due, from the customer. In addition, the Group recognizes contract asset upon the approval of non-cancellable contracts that generate an unconditional right to receive cash consideration prior to services being
rendered. The Company’s management has consistently recognized that an amount of consideration is due, for legal, finance and accounting purposes, when a short-term non-interest bearing note is received from a customer in connection with a
deposit or advance agreement entered into with the customer for advertising services to be rendered by the Group in the short term.
(q) Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an
outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognized for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provisions due to passage of time is recognized as interest expense.
(r) Equity
The capital stock and other equity accounts include the effect of restatement through December 31, 1997, determined by applying the change in
the Mexican National Consumer Price Index between the dates capital was contributed or net results were generated and December 31, 1997, the date through which the Mexican economy was considered hyperinflationary under the guidelines of
IFRS Standards. The restatement represented the amount required to maintain the contributions and accumulated results in Mexican Pesos in purchasing power as of December 31, 1997.
Where any company in the Group purchases shares of the Company’s capital stock (shares repurchased), the consideration paid, including any
directly attributable incremental costs is deducted from equity attributable to stockholders of the Company until the shares are cancelled, reissued, or sold. Where such shares repurchased are subsequently reissued or sold, any
consideration received, net of any directly attributable incremental transaction costs, is included in equity attributable to stockholders of the Company.
(s) Revenue Recognition
In connection with the initial adoption of IFRS 15, in the first quarter of 2018, the Company’s management: (i) reviewed significant revenue
streams and identified certain effects on revenue recognition in the Group’s Cable and Sky segments, as discussed below; (ii) used the retrospective cumulative effect, which consists in recognizing any cumulative adjustment resulting from
the new standard at the date of initial adoption in consolidated equity; and (iii) did not restate the comparative information for prior years, which was reported under the revenue recognition IFRS Standard in effect in those periods (see
Note 28).
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided. The
Group recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities, as
described below. The Group bases its estimate of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
The Group derives the majority of its revenues from media and entertainment-related business activities both in Mexico and internationally.
Revenues are recognized when the service is provided and collection is probable. A summary of revenue recognition policies by significant activity is as follows:
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Cable television, internet and telephone subscription, and pay-per-view and installation fees are recognized in the period in which
the services are rendered. Beginning on January 1, 2018, in accordance with IFRS 15, incremental costs for obtaining contracts with customers, primarily commissions, are recognized as assets in the Group’s consolidated statement
of financial position and amortized in the expected life of contracts with customers.
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•
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Revenues from other telecommunications and data services are recognized in the period in which these services are provided. Other
telecommunications services include long distance and local telephony, as well as leasing and maintenance of telecommunications facilities.
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•
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Sky program service revenues, including advances from customers for future direct-to-home (“DTH”) program services, are recognized at
the time the service is provided. Beginning on January 1, 2018, in accordance with IFRS 15, certain incremental costs for obtaining contracts with customers, primarily commissions, are recognized as assets in the Group’s
consolidated statement of financial position and amortized in the expected life of contracts with customers.
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•
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Advertising revenues, including deposits and advances from customers for future advertising, are recognized at the time the
advertising services are rendered.
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•
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Revenues from program services for network subscription and licensed and syndicated television programs are recognized when the
programs are sold and become available for broadcast.
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•
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Revenues from magazine subscriptions are initially deferred and recognized proportionately as products are delivered to subscribers.
Revenues from the sales of magazines are recognized on the date of circulation of delivered merchandise, net of a provision for estimated returns.
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•
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Revenues from publishing distribution are recognized upon distribution of the products.
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•
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Revenues from attendance to soccer games, including revenues from advance ticket sales for soccer games and other promotional events,
are recognized on the date of the relevant event.
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•
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Motion picture production and distribution revenues are recognized as the films are exhibited.
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•
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Gaming revenues consist of the net win from gaming activities, which is the difference between amounts wagered and amounts paid to
winning patrons and are recognized at the time of such net win.
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In respect to sales of multiple products or services, the Group evaluates whether it has fair value evidence for each deliverable in the
transaction. For example, the Group sells cable television, internet and telephone subscription to subscribers in a bundled package at a rate lower than if the subscriber purchases each product on an individual basis. Subscription revenues
received from such subscribers are allocated to each product in a pro-rata manner based on the fair value of each of the respective services.
(t) Interest Income
Interest income is recognized using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount
to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables
is recognized using the original effective interest rate.
(u) Employee Benefits
Pension and Seniority Premium Obligations
Plans exist for pensions and seniority premiums (post-employment benefits), for most of the Group’s employees funded through irrevocable trusts.
Increases or decreases in the consolidated liability or asset for post-employment benefits are based upon actuarial calculations. Contributions to the trusts are determined in accordance with actuarial estimates of funding requirements.
Payments of post-employment benefits are made by the trust administrators. The defined benefit obligation is calculated annually using the projected unit credit method. The present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related
pension obligation.
Remeasurement of post-employment benefit obligations related to experience adjustments and changes in actuarial assumptions of post- employment
benefits are recognized in the period in which they are incurred as part of other comprehensive income or loss in consolidated equity.
Profit Sharing
The employees’ profit sharing required to be paid under certain circumstances in Mexico, is recognized as a direct benefit to employees in the
consolidated statements of income in the period in which it is incurred.
Termination Benefits
Termination benefits, which mainly represent severance payments by law, are recorded in the consolidated statement of income. The Group
recognizes termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognizes costs for a restructuring that involves the payment of
termination benefits.
(v) Income Taxes
The income tax expense for the period comprises current and deferred income tax. Income tax is recognized in the consolidated statement of
income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the income tax is recognized in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position
date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns and establishes provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Deferred income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction (other than in a business combination) that at the time of the transaction affects neither accounting nor taxable income or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantively enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is recovered or the deferred income tax
liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the
temporary differences and tax loss carryforwards can be utilized. For this purpose, the Group takes into consideration all available positive and negative evidence, including factors such as market conditions, industry analysis, projected
taxable income, carryforward periods, current tax structure, potential changes or adjustments in tax structure, and future reversals of existing temporary differences.
Deferred income tax liabilities are provided on taxable temporary differences associated with investments in subsidiaries, joint ventures and
associates, except for deferred income tax liabilities where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are provided on deductible temporary differences associated with investments in subsidiaries, joint ventures and associates, to the extent that it is probable that there will be sufficient taxable income against
which to utilize the benefit of the temporary difference and it is expected to reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the
balances on a net basis.
(w) Derivative Financial Instruments
The Group recognizes derivative financial instruments as either assets or liabilities in the consolidated statements of financial position and
measures such instruments at fair value. The accounting for changes in the fair value of a derivative financial instrument depends on the intended use of the derivative financial instrument and the resulting designation. For a derivative
financial instrument designated as a cash flow hedge, the effective portion of such derivative’s gain or loss is initially reported as a component of other comprehensive income or loss and subsequently reclassified into income when the
hedged exposure affects income. The ineffective portion of the gain or loss is reported in income immediately. For a derivative financial instrument designated as a fair value hedge, the gain or loss is recognized in income in the period of
change together with the offsetting loss or gain on the hedged item attributed to the risk being hedged. When a hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument that has
been recognized in other comprehensive income remains in equity until the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately
reclassified to income or loss. For derivative financial instruments that are not designated as accounting hedges, changes in fair value are recognized in income in the period of change. During the years ended December 31, 2020, 2019 and
2018, certain derivative financial instruments qualified for hedge accounting (see Note 15).
(x) Comprehensive Income
Comprehensive income for the period includes the net income for the period presented in the consolidated statement of income plus other
comprehensive income for the period reflected in the consolidated statement of comprehensive income.
(y) Share-based Payment Agreements
Key officers and employees of certain subsidiaries of the Company have entered into agreements for the conditional sale of Company’s shares
under the Company’s Long-Term Retention Plan (“LTRP”). The share-based compensation expense is measured at fair value at the date the equity benefits are conditionally sold to these officers and employees, and is recognized as a charge to
consolidated income (administrative expense) over the vesting period. The Group recognized a share-based compensation expense of Ps.984,356, Ps.1,129,644 and Ps.1,327,549 for the years ended December 31, 2020, 2019 and 2018, respectively,
of which Ps.962,806, Ps.1,108,094 and Ps.1,305,999 was credited in consolidated stockholders’ equity for those years, respectively (see Note 17).
(z) Leases
Through December 31, 2018:
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The determination of whether an arrangement was, or contained, a lease was based on the substance of the arrangement and required an
assessment of whether the fulfillment of the arrangement was dependent on the use of a specific asset or assets and whether the arrangement conveyed the right to use the asset.
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•
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Leases of property, plant and equipment and other assets where the Group held substantially all the risks and rewards of ownership
were classified as finance leases. Finance lease assets were capitalized at the commencement of the lease term at the lower of the present value of the minimum lease payments or the fair value of the lease asset. The obligations
relating to finance leases, net of finance charges in respect of future periods, were recognized as liabilities. The interest element of the finance cost was charged to the consolidated statement of income over the lease period so
as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases was depreciated over the shorter of the useful life of
the asset and the lease term.
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•
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Leases where a significant portion of the risks and rewards were held by the lessor were classified as operating leases. Rentals were
charged to the consolidated statement of income on a straight line basis over the period of the lease.
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•
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Leasehold improvements were depreciated at the lesser of its useful life or contract term.
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In the first quarter of 2019, the Group adopted IFRS 16 Leases (“IFRS 16”), which became effective
for annual periods beginning on January 1, 2019 (see Note 28). The Group does not apply this new IFRS Standard to short-term leases and leases for which the underlying asset is of low value, as permitted by the guidelines of IFRS 16.
On adoption of IFRS 16, the Group recognized lease liabilities in relation to leases which had previously been classified as operating leases
under the principles of IAS 17 Leases (“IAS 17”). These liabilities were measured at the present value of the remaining lease payments, discounted using
the lessee´s incremental borrowing rate as of January 1, 2019. The average lessee’s incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 4.7% and 10.6% for U.S. dollars leases and Mexican pesos leases,
respectively.
(aa) New and Amended IFRS Standards
The Group adopted IFRS 16 in 2019, which became effective on January 1, 2019 (see Notes 2 (k), 2 (z) and 28). The Group adopted IFRS 15 and IFRS
9 in 2018, which became effective on January 1, 2018 (see Notes 2 (i), 2 (t) and 28). Some other amendments and improvements to certain IFRS Standards became effective on January 1, 2020, 2019 and 2018, and they did not have any significant
impact on the Group’s consolidated financial statements.