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The financial statements for the year ended December 31, zooo as originally issued have been reexpressed in constant pesos <br />with purchasing power at December 31, zoos, as follows: <br />• Figures of the parent company and its Mexican subsidiaries were restated using the zoo) inflation factor of t.oyyo derived <br />from the Mexican National Consumer Price Index (NCPI). <br />• U.S. dollar amounts reported by foreign subsidiaries were restated using the loot U.S. inflation factor of 1.0143. Constant <br />U.S. dollar amounts at December 31, toot were translated at the prevailing exchange rate at the end of the reporting period, <br />which was Ps. 9.15 per U.S. dollar. <br />b. Use of estimated <br />The preparation of financial statements in conformity with generally accepted accounting principles requires management <br />to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent <br />assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reporting <br />period. Actual consolidated results could differ from these estimates. <br />c. Recognition of the effects of inflation <br />The Company recognizes the effects of inflation on financial information as required by Mexican accounting principles <br />Bulletin B-to, Accounting Recognition of the Effects of inflation on Financial Information, as amended, issued by the Mexican <br />Institute of Public Accountants. Bulletin B-1o requires that all financial information presented be expressed in constant pesos <br />with purchasing power at the latest balance sheet date. <br />The Company elected to use the specific-cost method to restate inventories. <br />Capital stock, additional paid in capital reserve for repurchase of the Company's own shares, cumulative effect of deferred <br />taxes and retained earnings were restated based on the NCPI. <br />The significant inflation accounting concepts and procedures are described below: <br />Net monetary effect <br />This represents the effect of inflation on monetary assets and liabilities. The net monetary effect of each year is included <br />in the consolidated statement of income under the caption "Comprehensive financing cost (income)". <br />Deficit from restatement of stockholders' equity <br />This consists of the accumulated monetary position result and of the accumulated result from holding non-monetary <br />assets. The result from holding non-monetary assets represents the difference between the increase in the specific value of <br />non-monetary assets and the increase in the value of such assets based only on inflation. <br />d. Cash equivalents <br />Cash equivalents are stated at cost plus accrued interest, similar to market value. <br />e. Inventories and cost of sales <br />Inventories are stated at estimated replacement cost, which includes only variable manufacturing expenses (direct-costing <br />method). The stated value of inventories is not in excess of market value. Fixed manufacturing expenses incurred in the toot <br />and zooo fiscal years in the amount of Ps. 400,256 and Ps. 379,046, respectively, are included in cost of sales. <br />This caption includes land and the development expenses incurred in order to sell the land on a short-term basis, restated <br />to reflect replacement values based on an appraisal made by independent experts. <br />Cost of sales represents the estimated replacement cost of inventories at the time of their sale, restated in constant pesos at <br />the balance sheet date. <br />(Thousands of Mexican pesos with purchasing power at Dmember 31. 2001 and dtousands of <br />US. dollars, except for per share values and exchange rates)