FORM 20-F Grupo Casa Saba, S.A.B. de C.V.

Deferred income tax is determined by applying the “asset and liability method” which requires a determination of the temporary differences between the financial statements carrying
amount and the tax basis of assets and liabilities. Significant judgments are required to appropriately assess the amounts of tax assets and liabilities. We record tax assets when we
believe that the recoverability of the asset is determined to probable by considering the “more likely than not” criteria. If this determination cannot be made, a valuation allowance is
established to reduce the carrying value of the asset. The more-likely-than-not threshold represents a positive assertion by management that the Group is entitled to the economic
benefits of a tax position. If a tax position is not considered more-likely-than-not to be sustained, no benefits of the position are to be recognized in the financial statements.
For the recognition of deferred tax assets derived from net operating losses and their corresponding valuation reserve, we make an assessment of:
(a) the aggregate amount of the tax loss carryforwards included in our income tax returns that we consider that the tax authorities would not reject such tax loss carryforwards based on
available evidence; and
(b) the likelihood of the recoverability of such tax loss carryforwards prior to their expiration through an analysis of estimated future taxable income.
More-likely-than-not is based on its technical merits (legislation and statutes, legislative intent, regulations, rulings, and case law) at the reporting date. For this assessment, the Group
assumes that the tax authorities will examine and have full knowledge of all relevant information for each position.
If during any period after recognition the threshold ceases to be met, the previously recorded benefit must be derecognized. Moreover, the benefit of a tax position that initially fails to
meet the more-likely-than-not threshold should be recognized in a subsequent period if changing facts and circumstances enable to meet the threshold, the matter is effectively settled
through litigation with the tax authorities, or the statute of limitations has expired.
Tax examinations may involve complex issues and their resolution may carry multiple years, if subject to negotiation or litigation. The Group believes its estimates of the unrecognized
tax benefits are reasonable, however uncertainties could affect the amount of unrecognized tax benefits in the future periods. It is difficult to estimate the timing and range of possible
change related to the uncertain tax positions, as finalizing audits with the authorities may involve administrative and legal proceedings. Therefore, any settlements or statute expirations
may result in a significant increase or decrease in the total unrecognized tax benefits, including those positions related to tax examinations being currently conducted.
Every reporting period, we analyze our actual results versus our estimates and adjust our tax asset valuations as necessary. If actual results vary from our estimates, the deferred tax
asset and/or valuations may be affected and necessary adjustments will be made based on relevant information. Any adjustments recorded will affect our net income in such period.
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