building a STRONGER foundation - Cemex

CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements – (Continued)
As of December 31, 2010, 2009 and 2008
(Millions of Mexican pesos)
Changes in goodwill in 2010, 2009 and 2008, excluding effects from the discontinued Australian assets (note 3B), were as follows:
2010 2009 2008
Balance at beginning of period.......................................................................... Ps 150,827 157,541 142,344
Increase for business acquisitions.................................................................... 81 504 1,289
Disposals ......................................................................................................... (448) (414) (187)
Impairment losses (note 11B).......................................................................... (189) – (18,314)
Foreign currency translation effects 1.............................................................. (8,177) (6,804) 32,409
Balance at end of period .................................................................................... Ps 142,094 150,827 157,541
1 The amounts presented in this line item refer to the effects on goodwill from foreign exchange fluctuations during the period between the reporting units’
currencies and the Mexican peso.
As mentioned in note 11B, during 2010 and 2008, based on impairment tests made during the last quarter of such years, CEMEX recognized
within “Other expenses, net” goodwill impairment losses in connection with the reporting units in Puerto Rico for approximately Ps189
(US$15) in 2010, and with the reporting units located in the United States, Ireland and Thailand for approximately Ps17,476 (US$1,272) in
2008. In addition, considering that the investment in CEMEX Venezuela is expected to be recovered through different means other than use,
in 2008, CEMEX recognized an impairment loss of approximately Ps838 (US$61) associated with the goodwill of this investment. Based on
impairment tests made during the last quarter of the year, no goodwill impairment losses were determined in 2009.
Intangible assets of definite life
Changes in balances of intangible assets of definite life in 2010, 2009 and 2008, excluding effects from the discontinued Australian assets
(note 3B), were as follows:
2010 2009 2008
Balance at beginning of period.......................................................................... Ps 39,253 45,303 40,577
Increase for business acquisitions.................................................................... 48 5 404
Additions (disposals), net 1 ............................................................................. (287) 47 1,445
Amortization ................................................................................................... (4,032) (4,350) (4,088)
Impairment losses 2 ......................................................................................... (5) (42) (1,598)
Foreign currency translation effects ................................................................ (1,235) (1,710) 8,563
Balance at end of period .................................................................................... Ps 33,742 39,253 45,303
1 CEMEX capitalized the costs incurred in the development stage of internal-use software for Ps30 in 2010, Ps161 in 2009 and Ps1,236 in 2008, related to the
replacement of the technological platform in which CEMEX executes the most important processes of its business model. The items capitalized refer to
direct costs incurred in the development phase of the software and relate mainly to professional fees, direct labor and related travel expenses.
2 Considering impairment indicators, during the last quarter of 2008, CEMEX tested intangible assets of definite life for impairment in the United States, and
determined that the carrying amount of names and commercial trademarks exceeded their value in use, resulting in an impairment loss of approximately
Ps1,598.
11A) MAIN ACQUISITIONS AND DIVESTITURES IN 2010, 2009 and 2008
Sale of assets in Australia
During 2009, CEMEX sold its Australian operations (note 3B).
Nationalization of CEMEX Venezuela
In August 18, 2008, as a result of a nationalization decree aimed to convert the cement industry in a sector controlled by the State, the
Government of Venezuela expropriated all businesses, assets and shares of CEMEX in such country and took control of its facilities. CEMEX
controlled and operated CEMEX Venezuela until August 17, 2008. In August 2008, CEMEX decided not to accept a compensation proposal
for US$650 from the Government of Venezuela, considering that it significantly undervalued its business in Venezuela, and in proportion to
price per ton of installed capacity and operating cash flow multiples, was lower than those proposals offered to the other foreign companies
for their assets in Venezuela. In October 2008, CEMEX submitted a request to the International Centre for Settlement of Investment Disputes
(“ICSID”), seeking international arbitration for the violations of the Venezuelan Government through its confiscation of assets without
compensation, and deprivation of rights and legal guarantees in the process. The ICSID Tribunal was constituted on July 6, 2009. On July 27,
2010, the arbitral tribunal heard arguments on the jurisdictional objections argued by the Republic of Venezuela and issued its decision in
favor of jurisdiction on December 30, 2010. The proceedings are now expected to proceed to the merits phase of the arbitration.
At December 31, 2010 and 2009, except for the impairment loss associated to the investment recognized in 2008, CEMEX has not adjusted
its investment in Venezuela for impairment, remaining confident that it will eventually reach an agreement and obtain fair compensation.
CEMEX carefully evaluates the evolution of the arbitration process with the ICSID and other negotiations to determine if the carrying amount
requires an impairment adjustment.
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