| Basis of Presentation and Summary of Significant Accounting Policies | Note 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation and Management’s
Estimates The accompanying consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission
(“SEC”). The preparation of the
accompanying consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts
of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the
Company’s financial statements. Actual results may differ from these estimates under different assumptions and conditions.
Estimates inherent in the preparation of these consolidated financial statements relate to the collectability of account receivables,
the valuation of inventories, estimated earnings on uncompleted contracts, useful lives and potential impairment of long-lived
assets, and other derivative financial instruments. Principles of Consolidation These audited consolidated
financial statements consolidate TGI, its subsidiaries Tecnoglass S.A.S (“TG”), C.I. Energía Solar S.A.S E.S.
Windows (“ES”), ES Windows LLC (“ESW LLC”), Tecnoglass LLC (“Tecno LLC”), Tecno RE LLC (“Tecno
RE”), GM&P Consulting and Glazing Contractors (“GM&P”), Componenti USA LLC (“Componenti”)
and ES Metals SAS (“ES Metals”), which are entities in which we have a controlling financial interest because we hold
a majority voting interest. To determine if we hold a controlling financial interest in an entity, we first evaluate if we are
required to apply the variable interest entity (“VIE”) model to the entity, otherwise the entity is evaluated under
the voting interest model. All significant intercompany accounts and transactions are eliminated in consolidation, including unrealized
intercompany profits and losses. The equity method of accounting is used for investments in affiliates and other joint ventures
over which the Company has significant influence but does not have effective control. Non-controlling interest When the Company owns a
majority of a subsidiary’s stock, the Company includes in its consolidated financial statements the non-controlling interest
in the subsidiary. The non-controlling interest in the Consolidated Statements of Operations and Other Comprehensive Income is
equal to the non-controlling proportionate share of the subsidiary’s net income and, as included in Shareholders’ Equity
on the Consolidated Balance Sheet, is equal to the non-controlling proportionate share of the subsidiary’s net assets. Foreign Currency Translation and Transactions The consolidated financial
statements are presented in U.S. Dollars, the reporting currency. Our foreign subsidiaries’ local currency is the Colombian
Peso, which is also their functional currency as determined by the market analysis, costs and expenses, assets, liabilities, financing
and cash flow indicators. As such, our subsidiaries’ assets and liabilities are translated at the exchange rate in effect
at the balance sheet date, with equity being translated at the historical rates. Revenues and expenses of our foreign subsidiaries
are translated at the average exchange rates for the period. The resulting cumulative foreign currency translation adjustments
from this process are included as a component of accumulated other comprehensive income (loss). Therefore, the U.S. Dollar value
of these items in our financial statements fluctuates from period to period. Cash and Cash Equivalents Cash and cash equivalents
include investments with original maturities of three months or less. As of December 31, 2020, and 2019, cash and cash equivalents
were primarily comprised of deposits held in operating accounts in the United States, and to a lesser amount, Colombia and Panama.
As of December 31, 2020 and 2019 the Company had no restricted cash. Investments The Company’s investments
are comprised of marketable securities, short term deposits and income producing real estate. Investments which are held
for trading are recorded at fair value and fluctuations in value are recorded as a non-operating income or expense. In addition,
we have investments in long-term marketable equity securities which are classified as available-for-sale securities and are recorded
at fair value. Short- term deposits and
other financial instruments with maturities greater than 90 days and shares in other companies that do not meet the requirements
for equity method treatment are recorded for at cost. We also have investments
in income-producing real estate. This real estate is recorded at cost and is depreciated using the straight-line method over its
estimated useful life. The depreciation and rental income associated with this real estate are recognized in the consolidated statement
of operations. These investments are recorded within long term assets on the Company’s balance sheet. Trade Accounts Receivable Trade accounts receivable
are recorded net of allowances for cash discounts for prompt payment, doubtful accounts and sales returns. The Company’s
policy is to reserve for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing
accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance for doubtful accounts
is necessary based on an analysis of past due accounts and other factors that may indicate that the collectability of an account
may be in doubt. Other factors that the Company considers include its existing contractual obligations, historical payment patterns
of its customers and individual customer circumstances, and a review of the local economic environment and its potential impact
on the collectability of accounts receivable. Account balances are deemed to be uncollectible and are charged off within 90 days
of having recorded an allowance and all means of collection have been exhausted and the potential for recovery is considered remote. On certain fixed price
contracts, a portion of the amounts billed are withheld by the customer as a retainage which typically amount to 10% of the invoiced
amount and can remain outstanding for several months until a final good receipt of the complete project to the customers satisfaction. Concentration of Risks and Uncertainties Financial instruments which
potentially subject the Company to credit risk consist primarily of cash and trade accounts receivable. The Company mitigates its
cash risk by maintaining its cash deposits with major financial institutions in the United States and Colombia. As discussed above,
the Company mitigates its risk to trade accounts receivable by performing on-going credit evaluations of its customers. Related party transactions The Company has related
party transactions such as sales, purchases, leases, guarantees, and other payments. We periodically performed a related party
analysis to identify transactions to disclose. Depending on the transactions, we aggregate some related party information by type. Inventories Inventories of raw materials,
which consist primarily of purchased and processed glass, aluminum, parts and supplies held for use in the ordinary course of business,
are valued at the lower of cost or market. Cost is determined using a weighted-average method. Inventory consisting of certain
job specific materials not yet installed (work in process) are valued using the specific identification method. Cost for finished
product inventory are recorded and maintained at the lower of cost or market. Cost includes raw materials and direct and applicable
indirect manufacturing overheads. Also, inventories related to contracts in progress are included within work in process and finished
goods, and are stated at using the specific identification method and lower of cost or market, respectively, and are expected to
turn over in less than one year. Reserves for excess or
slow-moving raw materials inventories are updated based on historical experience of a variety of factors including sales volume
and levels of inventories at the end of the period. The Company does not maintain allowances for the lower of cost or market for
inventories of finished products as its products are manufactured based on firm orders rather than built-to-stock. Property, Plant and Equipment Property, plant and equipment
are recorded at cost. Significant improvements and renewals that extend the useful life of the asset are capitalized. Interest
caused while acquired property is under construction and installation are capitalized. Repairs and maintenance are charged to expense
as incurred. When property is retired or otherwise disposed of, the cost and related accumulated depreciation are removed from
the accounts and any related gains or losses are included in income as a reduction to or increase in selling, general and administrative
expenses. Depreciation is computed on a straight-line basis, based on the following estimated useful lives:
Buildings 20 years
Machinery and equipment 10 years
Furniture and fixtures 10 years
Office equipment and software 5 years
Vehicles 5 years The Company also records
within fixed assets all the underlying assets of a capital lease. Initial recognition of these assets are done at the present value
of all future lease payments. A capital lease is a lease in which the lessor transferred substantially all of the benefits and
risks associated with the ownership of the property. Long Lived Assets The Company periodically
reviews the carrying values of its long lived assets when events or changes in circumstances would indicate that it is more likely
than not that their carrying values may exceed their realizable values, and record impairment charges when considered necessary.
The outbreak of COVID-19 and its associated economic impact, including a significant decrease in the market price of our ordinary
shares, was considered a triggering event as of the first quarter of 2020, requiring us to reassess our goodwill and long-lived
asset valuations, as well as assumptions of future income from underlying assets, and there was no new trigger in the second, third
or fourth quarter of 2020.The extent of the impact of the pandemic depends on future developments which are highly uncertain. When circumstances indicate
that an impairment may have occurred, the Company tests such assets for recoverability by comparing the estimated undiscounted
future cash flows expected to result from the use of such assets and their eventual disposition to their carrying amounts. If the
undiscounted future cash flows are less than the carrying amount of the asset, an impairment loss, measured as the excess of the
carrying value of the asset over its estimated fair value, is recognized. Fair value is determined through various valuation techniques,
including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Goodwill We review goodwill for
impairment each year on December 31 st Under ASC 350-20-35-4 through
35-8A, the goodwill impairment test requires a comparison of the fair value of the reporting unit with its carrying amount, including
goodwill. If the carrying amount of the reporting unit is greater than zero and its fair value exceeds its carrying amount, goodwill
of the reporting unit is considered not impaired. The Company has only one reporting unit and as such the impairment analysis was
done by comparing the Company’s market capitalization with its book value of equity. As of December 31, 2020, the Company’s
market capitalization substantially exceeded its book value of equity and as such no impairment of goodwill was indicated. See
Note 11- Goodwill and Intangible Assets for additional information. Intangible Assets Intangible assets with
definite lives subject to amortization are amortized on a straight-line basis. We also review these intangibles for impairment
when events or significant changes in circumstance indicate that the carrying value may not be recoverable. Events or circumstances
that indicate that impairment testing may be required include changes in building codes and regulation, loss of key personnel or
a significant adverse change in business climate or regulations. There were no triggering events or circumstances noted and as
such no impairment was needed for the intangible assets subject to amortization. See Note 11 - Goodwill and Intangible Assets for
additional information. Leases We
determine if an arrangement is a lease at inception. We include finance lease right-of-use assets as part of property and equipment
and the lease liability as part of our current portion of long-term debt and long-term debt on our Consolidated Balance Sheet.
Leases considered short-term are not capitalized, given our election not to recognize right-of-use assets and lease liabilities
arising from short-term leases, but instead considered operating leases and the resulting rental expense is recognized on our Consolidated
Statement of Operations as incurred. Finance
lease right-of-use assets and lease liabilities are recognized based on the present value of the future lease payments over the
lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based
on the information available at commencement date in determining the present value of future payments. Our lease terms may include
options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Financial Liabilities Financial liabilities correspond
to the financing obtained by the Company through bank credit facilities and accounts payable to suppliers and creditors. Financial
liabilities are initially recognized based on their fair value, which is usually equal to the transaction value less directly attributable
costs. Subsequently, such financial liabilities are carried at their amortized cost according to the effective interest rate method
determined at initial recognition, and recognized in the results of the period during the time of amortization of the financial
obligation. Dividends We have accounted for dividends
declared as a liability under ASC 480, Distinguishing Liabilities from Equity, since our shareholders have had the option to elect
cash or stock. When the dividend has been declared, we record the transaction as a reduction to retained earnings and an increase
to dividends payable. We then reclassify stock dividends from dividends payable to additional paid-in capital when the shareholder
elects a stock dividend instead of cash. The dividend payable is not subject to remeasurement at each balance sheet date since
the dividend is a fixed monetary amount known at inception and thus no change in fair value adjustment is necessary. Fair Value of Financial Instruments ASC 820, Fair Value
Measurements The standard describes three level of inputs
that may be used to measure fair value: Level 1: Quoted prices in active
markets for identical assets or liabilities. Level 2: Observable inputs other
than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or
other inputs that are observable by observable market data for substantially the full term of the assets or liabilities. Level 3: Unobservable inputs that
are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. See Note 15 – Hedging Activities and
Fair Value Measurements. Derivative Financial Instruments The Company recognizes
all derivative financial instruments as either assets or liabilities at fair value on the consolidated balance sheet. The unrealized
gains or losses arising from changes in fair value of derivative instruments that are designated and qualify as cash flow hedges,
are recorded in the consolidated statement of comprehensive income. Amounts in Accumulated other comprehensive loss on the consolidated
balance sheet are reclassified into the consolidated statement of income in the same period or periods during which the hedged
transactions are settled. Revenue Recognition Our principal sources of
revenue are derived from product sales, sometimes referred to as standard form sales, and supply and installation contracts, sometimes
referred to as revenues from fixed price contracts. We identified one single performance obligation for both forms of sales. Revenue
is recognized when control is transferred to our customers. For product sales, the performance obligations are satisfied at a point
in time and control is deemed to be transferred upon delivery. Approximately 27% of the
Company’s consolidated net sales is generated by supply and installation contracts with customers that require the Company
to design, develop, test, manufacture, and install windows according to the customers’ specifications. These contracts are
primarily multi-year contracts with real estate general contractors and are generally priced on a fixed-price basis and are invoiced
based on contract progress. To determine the proper
revenue recognition method, the Company first evaluates each of its contractual arrangements to identify its performance obligations.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. All the Company’s
contracts have a single performance obligation because the promise to transfer the individual good or service is not separately
identifiable from other promises within the contract and is, therefore, not distinct. These contractual arrangements either require
the use of a highly specialized manufacturing process to provide goods according to customer specifications or represent a bundle
of contracted goods and services that are integrated and together represent a combined output, which may include the delivery of
multiple units. These performance obligations
are satisfied over time. Sales are recognized over time when control is continuously transferred to the customer during the contract.
The continuous transfer of control to the customer is supported by contract clauses that provide for progress or performance-based
payments. Generally, if a customer unilaterally terminates a contract, the Company has the right to receive payment for costs incurred
plus a reasonable profit for products and services that do not have alternative use to the Company. Sales are recorded using
the cost-to-cost method on supply and installation contracts that include performance obligations satisfied over time. These sales
are generally recorded at amounts equal to the ratio of actual cumulative costs incurred divided by total estimated costs at completion,
multiplied by (i) the transaction price, less (ii) the cumulative sales recognized in prior periods. Accounting for the sales
and profits on performance obligations for which progress is measured using the cost-to-cost method involves the preparation of
estimates of: (1) transaction price and (2) total costs at completion, which is equal to the sum of the actual incurred costs to
date on the contract and the estimated costs to complete the contract’s statement of work. Incurred costs include labor,
material, and overhead and represent work performed, which corresponds with and thereby represents the transfer of ownership to
the customer. Performance obligations are satisfied over time when the risk of ownership has been passed to the customer and/or
services are performed. The estimated profit or loss at completion on a contract is equal to the difference between the transaction
price and the total estimated cost at completion. Contract modifications
routinely occur to account for changes in contract specifications or requirements. In most cases, contract modifications are for
goods or services that are not distinct and, therefore, are accounted for as part of the existing contract. Transaction price estimates
include additional consideration for submitted contract modifications or claims when the Company believes it has an enforceable
right to the modification or claim, the amount can be reliably estimated and its realization is reasonably assured. Amounts representing
modifications accounted for as part of the existing contract are included in the transaction price and recognized as an adjustment
to sales on a cumulative catch-up basis. The Company’s supply
and installation contracts allow for progress payments to bill the customer as contract costs are incurred and the customer often
retains a small portion of the contract price until satisfactory completion of the contractual statement of work, which is a retainage
of approximately 10%. The Company records an asset for unbilled receivables due to completing more work than the progress payment
schedule allows to collect at a point in time. For certain supply and installation contracts, the Company receives advance payments.
Advanced payments are not considered a significant financing component because they are a negotiated contract term to ensure the
customer meets its financial obligation, particularly when there are significant upfront working capital requirements. The Company
records a liability for advance payments received in excess of sales recognized, which is presented as a contract liability on
the balance sheet. Revisions or adjustments
to estimates of the transaction price, estimated costs at completion and estimated profit or loss of a performance obligation are
often required as work progresses under a contract, as experience is gained, as facts and circumstances change and as new information
is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required
if contract modifications occur. While there are various factors that can affect the accuracy of cost estimates related to the
revision of the proper allocation of indirect labor and indirect material costs to each project, such estimates are made based
on the most updated historical information and margins of those indirect costs over the associated revenues and on all relevant
information associated with each specific project at any point in time. The impact of revisions in profit or loss estimates are
recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if
significant, can materially affect the Company’s results of operations and cash flows, as well as reduce the valuations of
contract assets and inventories, and in some cases result in liabilities to complete contracts in a loss position. The Company
recognizes a liability for non-recurring obligations as situations considering that projects actual costs are usually adjusted
to estimated costs. The Company did not recognize sales for performance obligations satisfied in prior periods during year ended
December 31, 2020. Shipping and Handling Costs The Company classifies
amounts billed to customers related to shipping and handling as product revenues. The Company records and presents shipping and
handling costs in selling expenses. Sales Tax and Value Added Taxes The Company accounts for
sales taxes and value added taxes imposed on its goods and services on a net basis - value added taxes paid for goods and services
purchased is netted against value added tax collected from customers and the net amount is paid to the government. The current
value added tax rate in Colombia for all of the Company’s products is 19%. A municipal industry and commerce tax (ICA) sales
tax of 0.7% is payable on all of the Company’s products sold in the Colombian market. Product Warranties The Company offers product
warranties in connection with the sale and installation of its products that are competitive in the markets in which the products
are sold. Standard warranties depend upon the product and service, and are generally from five to ten years for architectural glass,
curtain wall, laminated and tempered glass, window and door products. Warranties are not priced or sold separately and do not provide
the customer with services or coverages in addition to the assurance that the product complies with original agreed-upon specifications.
Claims are settled by replacement of the warrantied products. The cost associated with product warranties was $680 and $2,453 during
the years ended December 31, 2020 and 2019, respectively. Advertising Costs Advertising costs are expensed
as they are incurred and are included in general and administrative expenses. Advertising costs for the years ended December 31,
2020 and 2019 amounted to approximately $987 and $1,416, respectively. Employee Benefits The Company provides benefits
to its employees in accordance with Colombian labor laws. Employee benefits do not give rise to any long-term liability. Income Taxes The Company’s operations
in Colombia are subject to the taxing jurisdiction of the Republic of Colombia. Tecnoglass LLC and Tecnoglass RE LLC are subject
to the taxing jurisdiction of the United States. Tecnoglass is subject to the taxing jurisdiction of the Cayman Islands. Annual
tax periods prior to December 2016 are no longer subject to examination by taxing authorities in Colombia. GM&P, Componenti
and ESW LLC are U.S. entities based in Florida subject to U.S. federal and state income taxes. The Company accounts for
income taxes using the asset and liability approach of accounting for income taxes (ASC 740 “Income Taxes”). Under
this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities
are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change
in deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of the Company’s
assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. For each tax jurisdiction
in which the Company operates, deferred tax assets and liabilities are offset against one another and are presented as a single
noncurrent amount within the consolidated balance sheets. The Company presents deferred
tax assets and liabilities net as either a non-current asset or liability, depending on the net deferred tax position. The Company
recognizes the financial statement effects of uncertain income tax positions when it is more likely than not, based on the technical
merits, that the position will be sustained upon examination. The Company accrues for other tax contingencies when it is probable
that a liability to a taxing authority has been incurred and the amount of the contingency can be reasonably estimated. Interest
accrued related to unrecognized tax and income tax related penalties are included in the provision for income taxes. The uncertain
income taxes positions are recorded in “Taxes payable” in the consolidated balance sheets. Earnings per Share The Company computes basic
earnings per share by dividing net income by the weighted-average number of ordinary shares outstanding during the period. Income
per share assuming dilution (diluted earnings per share) would give effect to dilutive potential ordinary shares outstanding during
the period. See Note 18 - Shareholders’ Equity for further detail on the calculation of earnings per share. Recently Issued Accounting Pronouncements In June 2016, FASB issued
Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326). This ASU represents a significant
change in the allowance for credit losses accounting model by requiring immediate recognition of management’s estimates of
current expected credit losses. Under the prior model, losses were recognized only as they were incurred, which FASB has noted
delayed recognition of expected losses that might not yet have met the threshold of being probable. The new model is applicable
to all financial instruments that are not accounted for at fair value through net income, thereby bringing consistency in accounting
treatment across different types of financial instruments and requiring consideration of a broader range of variables when forming
loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, (with early application permitted).
The FASB issued ASU 2019-10 and ASU 2019-11 during the fourth quarter of 2019 that will postpone the effective date to the year
beginning after December 15, 2022. In February 2020, the FASB issued ASU 2020-02 “Financial Instruments – Credit Losses
(Topic 326) and Leases (Topic 842), which amends SEC Staff Accounting Bulletin No. 119 (SAB119) which contains interpretative guidance
from the SEC aligned to the FASB’s ASC 326. The Company is currently evaluating the potential effect of this ASU on its consolidated
financial statements. In March 2020, the FASB
issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial
Reporting”. The amendments in this Update provide optional expedients and exceptions for contracts, hedging relationships,
and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only
to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued
because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications
made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as
of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging
relationship. The amendments in this Update are effective for the Company through December 31, 2022 with early adoption permitted.
The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements. |
