Mail Stop 7010
September 15, 2005
Dr. Jose Luis Guerrero
The ICA Corporation
Mineria No. 145
Edificio Central
11800 Mexico City
Mexico
RE: The ICA Corporation
Form 20-F/ A
Filed July 28, 2005
File # 1-11080
Dear Mr. Guerrero:
We have reviewed your filings and have the following
comments.
We have limited our review to only disclosures concerning your
controls and procedures, revenue recognition, and functional
currency
and will make no further review of your documents. Where
indicated,
we think you should revise your disclosures in future filings in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects. We welcome
any
questions you may have about our comments or on any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 20-F for the Year ended December 31, 2004
Item 15. Controls and Procedures, page 91
1. We note your disclosure that your Chief Executive Officer and
Chief
Financial Officer concluded that your disclosure controls and
procedures were effective to provide reasonable assurance that the
information required to be disclosed in reports filed under the
Exchange Act was recorded, processed, summarized and reported as
and
when required. In future filings, revise to clarify, if true,
that
your officers concluded that your disclosure controls and
procedures
are also effective for the purpose of ensuring that material
information required to be in this report is made known to
management
and others, as appropriate, to allow timely decisions regarding
required disclosures. Alternatively, you may simply conclude that
your disclosure controls are effective or ineffective, whichever
the
case may be. See Exchange Act Rule 13a-15(e).
Note 3. Summary of Significant Accounting Policies, page F-14
(i) Accounting for Construction Contracts, page F-18
2. We note that some of your projects, such as the El Cajon
hydroelectric project, have terms which do not require the
customer to
pay for the work completed until the end of the project, which can
be
several years from the current time. Given that progress payments
are
not required, confirm to us that accounting for these contracts
under
the percentage-of-completion method appropriately recognizes the
legal
and economic results of contract performance. In this regard, we
note
that under most contracts for construction of facilities to a
buyer`s
specifications, both the buyer and the seller (contractor) obtain
enforceable rights. The legal right of the buyer to require
specific
performance of the contract means that the contractor has, in
effect,
agreed to sell his rights to work-in-progress as the work
progresses.
This view is consistent with the contractor`s legal rights; he
typically has no ownership claim to the work-in-progress but has
lien
rights. Furthermore, the contractor typically has the right to
require the buyer, under most financing arrangements, to make
progress
payments to support his ownership investment and to approve the
facilities constructed date if they meet the contract
requirements.
The buyer`s right to take over the work-in-progress at his option
(usually with a penalty) provides additional evidence to support
that
view. Accordingly, the business activity taking place under a
typical
construction contract supports the concept that in an economic
sense
performance is, in effect, a continuous sale (transfer of
ownership
rights) that occurs as the work progresses. Expand your critical
accounting policy to address how the terms of these contracts,
notwithstanding the fact that progress payments are not made,
convey
to you enforceable rights such that from and economic and legal
perspective percentage of completion accounting is the appropriate
method of accounting for these contracts. Refer to paragraph 22
of
SOP 81-1.
3. Tell us and expand your critical accounting policies to address
how
you factor in the risk of inflation, exchange rate fluctuations
and
increases in the cost of raw materials into your estimate of costs
to
complete a given project.
4. We note that certain of your contracts contain guarantees
related
to timing of completion or achievement of performance levels.
Please
tell us if you have failed to meet such guarantees on any of your
material contracts during the periods presented. In addition,
please
tell us and expand your critical accounting policy to address how
you
factor in the penalties on such guarantees in your estimate of
costs
to complete a given project.
5. Please tell us and revise your disclosures to clarify how you
account for indications of collection difficulties on contracts in
which payment is not yet due. That is, tell us if an allowance is
set
up as a bad debt reserve or if revenue is reduced. In addition,
please also tell us why your write-offs of bad debts in 2004 and
2003
are substantially greater than the provisions in each respective
year.
6. Tell us and revise your disclosures to identify what indirect
costs
are included in your estimate of total contract costs. Confirm
that
such costs are allowable for US GAAP purposes.
Note 30. Differences Between Accounting Principles Generally
Accepted
in Mexico and the United States of America, page F-56
General
7. Please tell us what consideration you have given to identifying
the
U.S. dollar as your functional currency under U.S. GAAP. In this
regard, we note that a significant amount of your contracts are
denominated in U.S. dollars, as is a substantial portion of your
debt.
Reference paragraph 5 and Appendix A of SFAS 52.
* * * *
Please respond to these comments within 10 business
days, or
tell us when you will provide us with a response. Please provide
us
with a supplemental response letter that keys your responses to
our
comments and provides any requested supplemental information.
Detailed letters greatly facilitate our review. Please file your
supplemental response on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require.
Since the company and its management are in possession of all
facts
relating to a company`s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide, in
writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in our review of your filing or in response
to
our comments on your filing.
If you have any questions regarding these comments, please
direct them to Patricia Armelin, Staff Accountant, at (202) 551-
3747,
Jeanne Baker, Assistant Chief Accountant, at (202) 551-3691 or, in
their absence, to the undersigned at (202) 551-3768.
.
Sincerely,
John Cash
Accounting Branch Chief
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Dr. Jose Luis Guerrero
The ICA Corporation
September 15, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE