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

Tax and legal contingencies
We are subject to various claims and contingencies related to tax and legal proceedings as described in Note 20 to our consolidated financial statements. Due to their nature, such tax
and legal proceedings involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions. Management
periodically assesses the probability of loss for such contingencies and accounts for a liability and/or discloses the relevant circumstances, as appropriate. If the potential loss from any
claim or tax and legal proceedings are considered probable and the amount can be reasonably estimated, we account for a liability for the estimated loss.
Our tax strategies are complex and involve interpretations of tax laws and regulations and are subject to review by the tax authorities. It is possible that the tax authorities could
challenge our application of these regulations. The tax authorities have challenged interpretations that we have made and have assessed additional taxes. Although we have, from time
to time, paid some of these additional assessments, in general, we believe we have been successful in sustaining our positions. No assurance can be given, however, that we will
continue to be as successful as we have been in the past or that pending appeals of current tax assessments will be judged in our favor.
Foreign operations
The Group’s foreign operation operates in a non-inflationary economic environment and its functional currency is the Brazilian real, and effective October 3, 2010, Chilean peso and
Peruvian peso.
We are exposed a variety of risks and uncertainties related to operating in Brazil, Chile and Peru, including political, economic or social upheaval, devaluations in the Brazilian Real,
Chilean peso and Peruvian peso, high levels of inflation and interest rates, the introduction of import, investment or currency restrictions, including pricing regulation on pharmaceutical
products, restrictions on the repatriation of earnings and capital.
Related parties
In accordance with the Mexican Income Tax Law, companies that carry out related party transactions are subject to tax obligations, with respect to the determination of prices agreed
upon. Such prices should be comparable to prices that would be used with or among independent parties at arm’s length transactions. The tax authorities could reject the amounts
determined and demand payment of taxes. Management estimates that all related party transactions were agreed upon at arm’s length basis and, therefore, there is no contingency in its
charge.
Fair Value of Derivatives
Our transactions are contracted to hedge the associated risks with changes exchange rate. Our hedges is documented by describing the strategy and objective of management of risks,
hedged risks, identification of the hedged primary position, its accounting recognition, and how its effectiveness is measured. We estimate that the changes in cash flows of the
derivative financial instrument maintain high effectiveness in offsetting the changes in cash flows of the primary position, both at the beginning and throughout the relationship of the
designated hedge.
Our derivative financial instruments are traded on recognized markets and with high creditworthy and reputable counterparties.
The estimated fair values of derivative financial instruments fluctuate over time determined by assessing the effect of future relevant economic variables as of the reporting date. These
values should be viewed in relation to the fair values of the underlying instruments or transactions, and as part of our overall exposure to fluctuations in foreign exchange rates.
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