building a STRONGER foundation - Cemex

(b) Goodwill
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)
Goodwill recognized under MFRS (note 11) has been adjusted under U.S. GAAP for: (i) the effect on goodwill from the U.S. GAAP
adjustments as of the acquisition dates; (ii) beginning January 1, 2002, goodwill is not amortized under U.S. GAAP, while under MFRS
goodwill was amortized until December 31, 2004; and (iii) until December 31, 2003, goodwill under MFRS was carried in the functional
currencies of the holding companies for the reporting units, was translated into pesos and was then restated based on the Mexican inflation,
while under U.S. GAAP, goodwill is carried in the functional currencies of the reporting units, and is restated, when inflationary accounting is
applicable under MFRS, by the inflation factor of the reporting unit's country, and is translated into Mexican pesos at the exchange rates
prevailing at the reporting date. Goodwill generated beginning January 1, 2005 under MFRS is carried consistently with the treatment of
goodwill under U.S. GAAP.
The reconciliation of goodwill under MFRS and U.S. GAAP for the years ended December 31, 2010, 2009 and 2008 is as follows:
2010 2009 2008
Goodwill under MFRS..................................................................................... Ps 142,094 150,827 157,541
Cumulative U.S. GAAP adjustments............................................................... (27,193) (27,760) (31,502)
Goodwill under U.S. GAAP ............................................................................ 114,901 123,067 126,039
U.S. GAAP adjustments:
Cumulative U.S. GAAP adjustments at beginning of year .............................. (27,760) (31,502) 11,675
Foreign exchange results and inflation effects............................................. 567 2,813 2,721
Impairment charges (see note 24(j))............................................................ – 929 (45,898)
Cumulative U.S. GAAP adjustments at end of year ........................................ Ps (27,193) (27,760) (31,502)
The accumulated impairment losses as of Decemeber 31, 2010 amounts approximately Ps46,150.
(c) Income Taxes and Employees' Statutory Profit Sharing
Deferred Income Taxes
Under MFRS, CEMEX determines deferred income taxes in a manner similar to U.S. GAAP (note 15B). Nonetheless, there are specific
differences as compared to the calculation under ASC 740, Income Taxes (“ASC 740”), resulting in adjustments in the reconciliation to U.S.
GAAP. These differences mainly arise from: (i) the recognition of the accumulated initial effect of the asset and liability method under MFRS
did not consider the deferred tax consequences of business combinations made before January 1, 2000; and (ii) the effects of deferred tax on
the reconciling items between MFRS and U.S. GAAP. The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities under U.S. GAAP at December 31, 2010 and 2009 are presented below:
2010 2009
Deferred tax assets:
Tax loss and tax credits carryforwards......................................................................................... Ps 73,843 77,602
Accounts payable and accrued expenses...................................................................................... 8,206 8,487
Others........................................................................................................................................... 13,302 3,364
Total gross deferred tax assets ..................................................................................................... 95,351 89,453
Less valuation allowance ............................................................................................................. (40,137) (32,079)
Total deferred tax assets under U.S. GAAP ............................................................................. 55,214 57,374
Deferred tax liabilities:
Property, machinery and equipment............................................................................................. (42,740) (48,198)
Others........................................................................................................................................... (4,882) (4,571)
Total deferred tax liability under U.S. GAAP .......................................................................... (47,622) (52,769)
Net deferred tax asset under U.S. GAAP ..................................................................................... Ps 7,592 4,605
Under U.S. GAAP, tax effects of intra-group transactions where the related assets remain in the consolidated balance sheet should be
eliminated in consolidation until the time at which the asset is sold outside the group. Under MFRS, the tax effects recognized by each
subsidiary as part of such intra-group sale of assets are not reversed. During 2008 (note 24(k)), in connection with an intra-group transfer of
intangible assets, a deferred tax asset recognized by the buyer under MFRS in the amount of Ps2,206 was eliminated for U.S. GAAP
purposes. The carrying amount of such deferred tax asset under MFRS as of December 31, 2010 and 2009 was Ps2,343 and Ps1,986,
respectively. During 2010, the estimated useful life of the asset was revised, considering a non-significant change in estimation which was
accounted for prospectively. As of December 31, 2010 and 2009, the deferred income tax benefit and expense recorded under MFRS, which was
reversed for U.S. GAAP purposes was Ps83 and Ps220, respectively.
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