INDEPENDENT AUDITORS’ REPORT TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF CRÉDITO REAL, S.A.B. DE C.V., SOCIEDAD FINANCIERA DE OBJETO MÚLTIPLE, ENTIDAD NO REGULADA
We have audited the accompanying consolidated balance sheets of Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada and subsidiary (the “Company”), which comprise the consolidated balance sheets as of December 31, 2013 and 2012, and the consolidated statements of income, changes in stockholders’ equity and cash flows for the years then ended, and a summary of the significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the accounting criteria established by the National Banking and Securities Commission (the “CNBV”, or the “Commission”) in its “General Provisions Applicable to Credit Institutions,
Exchange Houses, Credit Unions, Limited Purpose Financial Institutions and Regulated Multiple Purpose Financial Institutions” (the “CNBV Provisions”), and for such internal controls as management deems necessary for the preparation of consolidated financial statements that are free of material misstatement, whether due to fraud or error.
Responsibility of the Auditor
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada and subsidiary as of December 31, 2013 and 2012, and their financial performance and their cash flows for the years then ended, in accordance with the accounting criteria established by the Commission.
Emphasis of matter
As indicated in Note 3 to the accompanying consolidated financial statements, the Commission issued modifications to the accounting criteria related to the classification methodology of the commercial portfolio, for the purpose of changing the model for determination of the allowance for loan losses from an incurred loss model to an expected loss model, in which credit losses estimated to take place during the following 12 months are recognized using credit information available as of the reporting date. The Commission imposed two deadlines for the implementation of this change in methodology: December 31, 2013, to recognize the cumulative effect of the change as it relates to loans to nonfinancial institutions classified within commercial credit portfolio and June 30, 2014 to recognize the cumulative effect of the change as it relates to loans to financial institutions classified within commercial portfolio. The Company recognized the initial financial effect related to commercial credit portfolio of nonfinancial institutions, which resulted in an increase in credit loss reserves reported on the consolidated balance sheet under the heading “Allowance for loan losses” in the amount of MX $5,572 million, with a corresponding charge in the consolidated statement of income under the heading of “Allowance for loan losses” in the same amount as of and for the year ended December 31, 2013. The Company is currently in the process of gathering information and evaluating the impact of applying the new model required by the CNBV Provisions to loans financial institutions.
The accompanying consolidated financial statements have been translated into English for the convenience of readers.
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu Limited
C.P.C. Rony García Dorantes
February 17, 2014