Company: CTTRF
Filing Date: 2025-04-30
Form Type: 20-F
Source: 0001292814-25-001765
Chunk: 325

Company: Controladora Vuela Compania de Aviacion, S.A.B. de C.V.
Filing Date: 2025-04-30
Form: 20-F
Item: Item 19
Chunk 325
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hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure
to changes in the hedged item’s fair value or cash flows attributable to the hedged risk(s).

Only if such hedges are expected to be effective in achieving
offsetting changes in fair value or cash flows of the hedge item(s) and are assessed on an ongoing basis to determine that they have been
effective throughout the financial reporting periods for which they were designated, hedge accounting treatment can be used.

Under the cash flow hedge (CFH) accounting model, the effective
portion of the hedging instrument’s changes in fair value is recognized in OCI, while the ineffective portion is recognized in current
year earnings in the statement of operations. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the
hedging instrument and the cumulative change in fair value of the hedged item. The amounts recognized in OCI are transferred to earnings
in the period in which the hedged transaction affects earnings. During the years ended December 31, 2024, 2023 and 2022, the Company did
not recognize an ineffective portion with respect to derivative financial instruments.

The realized gain or loss of derivative financial instruments
and non-derivative financial instruments that qualify as CFH are recorded in the same caption of the hedged item in the consolidated statements
of operations.

Accounting for the time value of options

The Company accounts for the time value of options in accordance
with IFRS 9, which requires all derivative financial instruments to be initially recognized at fair value. Subsequent measurement for
options purchased and designated as CFH requires that the option’s changes in fair value be segregated into its intrinsic value
(which will be considered the hedging instrument’s effective portion in OCI) and its correspondent changes in extrinsic value (time
value and volatility). The extrinsic value changes will be considered as a cost of hedging (recognized in OCI in a separate component
of equity) and accounted for in earnings when the hedged items also are recognized in earnings.

u) Financial instruments - Disclosures

IFRS 7 (“ Financial Instruments - Disclosures”)
requires a three-level hierarchy for fair value measurement disclosures and requires entities to provide additional disclosures about
the relative reliability of fair value measurements (Notes 4 and 5).

v) Treasury shares

The Company’s equity instruments that are reacquired
(treasury shares) are recognized at cost and