building a STRONGER foundation - Cemex

Comprehensive Financing Result. Pursuant to MFRS, the comprehensive financing result should measure the real cost (gain) of
an entity’s financing, net of the foreign currency fluctuations and the inflationary effects on monetary assets and liabilities. In periods
of high inflation or currency depreciation, significant volatility may arise and is reflected under this caption. Comprehensive financing
income (expense) includes:
financial or interest expense on borrowed funds;
financial income on cash and temporary investments;
appreciation or depreciation resulting from the valuation of financial instruments, including derivative instruments and
marketable securities, as well as the realized gain or loss from the sale or liquidation of such instruments or securities;
foreign exchange gains or losses associated with monetary assets and liabilities denominated in foreign currencies; and
beginning in 2008, gains and losses resulting from having monetary liabilities or assets exposed to inflation (monetary
position result) in countries under high inflation environments. Until December 31, 2007, monetary position results were
calculated on each country’s net monetary position despite the level of inflation.
108
Year Ended December 31,
2008 2009
(in millions of Pesos)
Comprehensive Financing Result:
Financial expense ........................................................................ Ps (10,199) Ps (13,513)
Financial income.......................................................................... 513 385
Results from financial instruments .............................................. (15,172) (2,127)
Foreign exchange result............................................................... (3,886) (266)
Monetary position result.............................................................. 418 415
Comprehensive financing result .................................................. Ps (28,326) Ps (15,106)
Our comprehensive financing result improved from a loss of Ps28.3 billion in 2008 to a loss of Ps15.1 billion in 2009. The
components of the change are shown above. Our financial expense increased approximately 32%, from Ps10.2 billion in 2008 to
Ps13.5 billion in 2009. The increase was primarily attributable to the change in interest rates and the recognition of fees related to the
Financing Agreement. Our financial income decreased 25%, from Ps513 million in 2008 to Ps385 million in 2009, primarily
attributable to significantly lower interest rates. Our results from financial instruments improved significantly from a loss of Ps15.2
billion in 2008 to a loss of Ps2.1 billion in 2009. The decrease in our loss from financial instruments was primarily attributable to the
closing of a significant portion of our derivatives instruments explained below. Our net foreign exchange result improved from a loss
of Ps3.9 billion in 2008 to a loss of Ps266 million in 2009, mainly due to the appreciation of the Mexican Peso and the Euro against
the Dollar. Our monetary position result (generated by the recognition of inflation effects over monetary assets and liabilities)
decreased approximately 1%, from a gain of Ps418 million during 2008 to a gain of Ps415 million during 2009.
During 2009, certain financing costs associated with the Financing Agreement were capitalized under MFRS. See note 12 to our
consolidated financial statements included elsewhere in this annual report. In the U.S. GAAP reconciliation of our 2009 financial
statements, we include a reconciliation item, as some of these financing costs under U.S. GAAP should be expensed as incurred and
recognized in our statement of operations.
Derivative Financial Instruments. For the year ended December 31, 2008, our derivative financial instruments that had a
potential impact on our comprehensive financing result consisted of foreign exchange derivative instruments (excluding our foreign
exchange forward contracts designated as hedges of our net investment in foreign subsidiaries), interest rate swaps, cross-currency
swaps, including our derivative instruments related to the issuance of perpetual debentures by consolidated entities, equity forward
contracts and interest rate derivatives related to energy projects as discussed in note 12C to our consolidated financial statements
included elsewhere in this annual report.
As required in the context of our renegotiation with our major lenders prior to entering into the Financing Agreement, during the
first half of 2009, we closed a significant portion of our derivative instruments. Furthermore, during July 2009, we closed the Japanese
Yen cross-currency swap derivatives associated with our perpetual debentures. Therefore, as of December 31, 2009, our derivative
financial instruments that had a potential impact on our comprehensive financing result consisted of equity forward contracts, a
forward instrument over the Total Return Index (TRI) of the Mexican Stock Exchange and interest rate derivatives related to energy
projects as discussed in note 12C to our consolidated financial statements included elsewhere in this annual report.