building a STRONGER foundation - Cemex
building a STRONGER foundation - Cemex
building a STRONGER foundation - Cemex
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CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES<br />
Notes to the Consolidated Financial Statements – (Continued)<br />
As of December 31, 2010, 2009 and 2008<br />
(Millions of Mexican pesos)<br />
As of December 31, 2010 and 2009, according to ASC 470-20, Debt with Conversion and other Options (“ASC 470-20”), under U.S. GAAP, the<br />
equity component of the Mandatorily Convertible Securities was reclassified to debt in the reconciliation of stockholders’ equity to U.S. GAAP and<br />
is presented within “Other non-current liabilities” together with the liability component in the condensed balance sheet financial information under<br />
US GAAP. Likewise, deferred income tax assets for approximately Ps562 in 2010 and Ps585 in 2009 recognized against stockholders’ equity under<br />
MFRS in connection with this transaction were eliminated (note 15B). The exchange of CBs for the Mandatorily Convertible Securities also<br />
qualified as the issuance of new debt and the extinguishment of the old facilities under ASC 470-50, which required CEMEX to measure the new<br />
financial obligation at fair value at inception and to recognize as interest expense in the reconciliation of net income (loss) to U.S. GAAP in 2009: a)<br />
the issuance costs related to the liability component, which were capitalized as deferred financing costs under MFRS for approximately<br />
Ps67(US$5), and b) the issuance costs related to the equity component recognized within “Other equity reserves” under MFRS for approximately<br />
Ps65 (US$5). Under U.S. GAAP, a deferred income tax asset of Ps34 and Ps37 at December 31, 2010 and 2009, respectively, was recognized in<br />
connection with the commissions and issuance costs mentioned above. In the reconciliation of net income (loss) to U.S. GAAP for 2010, the<br />
reversal of the amortization of deferred financing costs recognized under MFRS associated with the liability component of the Mandatorily<br />
Convertible Securities that were fully expensed under U.S. GAAP in 2009 led to the recognition of an income of approximately Ps10.<br />
The fair value at measurement date approximates to the carrying value of approximately Ps4,126 (US$315) at December 31, 2009 determined<br />
by CEMEX for the Mandatorily Convertible Securities, and it is considered a Level 2 fair value measurement given that the market price of<br />
these securities was available but the contract included a one-year trading restriction. As of December 31, 2010, the fair value of the<br />
Mandatorily Convertible Securities was Ps3,780 (US$306), considered as a Level 1 fair value measurement.<br />
2010 Optional Convertible Subordinated Notes<br />
Under MFRS, the 2010 Optional Convertible Subordinated Notes issued on March 30, 2010 for approximately Ps8,837 (US$715), represent a<br />
compound instrument which has a liability component and an equity component (note 12A). The equity component, which represents the<br />
premium of the noteholders’ call option, amounted to Ps1,232, net of commissions of Ps26, and was recognized upon issuance within “Other<br />
equity reserves.” As of December 31, 2010, the liability component for these notes amounted to approximately Ps7,690 (US$622). As of<br />
December 31, 2010 the fair value of the Optional Convertible Notes was Ps9,654 (US$781), considered as a Level 2 fair value measurement<br />
given that the market price of these notes was available but the contract included a one-year trading restriction.<br />
As of December 31, 2010, pursuant to ASC 470-20 under U.S. GAAP, the equity component of the 2010 Optional Convertible Subordinated<br />
Notes was reclassified to debt in the reconciliation of stockholders’ equity to U.S. GAAP and is presented within “Other non-current liabilities”<br />
together with the liability component in the condensed balance sheet financial information under US GAAP. Likewise, a deferred income tax<br />
liability for approximately Ps315 in 2010 recognized against stockholders’ equity under MFRS in connection with this transaction was eliminated<br />
(note 15B). Moreover, the issuance costs related to the equity component recognized within “Other equity reserves” in 2010 under MFRS for<br />
approximately Ps26 (US$2) was reclassified to deferred financing costs under U.S. GAAP. In the reconciliation of net income (loss) to U.S.<br />
GAAP for 2010, the amortization of deferred financing costs recognized under U.S. GAAP associated with the equity component of these notes<br />
that were recognized in equity under MFRS in 2010 led to the recognition of interest expense of approximately Ps4.<br />
Fair Value Option<br />
Beginning in January 1, 2008, ASC 825, Financial Instruments (“ASC 825”), provides entities with an option to measure several financial<br />
instruments and certain other items at fair value. Under ASC 825, unrealized gains and losses on items for which the fair value option has<br />
been elected are reported in earnings at each reporting period. As of and for the years ended December 31, 2010, 2009 and 2008, CEMEX has<br />
not elected to measure any financial instruments or other items at fair value.<br />
Fair value of non-financial assets and non-financial liabilities<br />
On January 1, 2009, CEMEX adopted ASC Topic 820, Fair Value Measurements and Disclosures, for fair value measurements of nonfinancial<br />
assets and non-financial liabilities that are recognized or disclosed at fair value in the financial statements on a non-recurring basis.<br />
For the periods ended December 31, 2010 and 2009 the non-financial assets and non-financial liabilities mentioned below correspond to a<br />
Level 3 measurement according to such topic.<br />
Based on the requirements of ASC 40-20-35, asset retirement and environmental obligations in 2010 and 2009 amounted to approximately<br />
Ps5,658 (US$460) and Ps5,322 (US$407), respectively, and are calculated based on the present value of estimated removal and other closure<br />
costs using our internal risk-free rate of return or an appropriate equivalent as detailed in note 2L and note 13.<br />
As indicated in ASC 360-10-35, long-lived assets held for sale with a carrying amount of Ps965 (US$78) in 2010 and Ps1,255 (US$96) in<br />
2009 are stated as mentioned in note 8 at their estimated realizable value and include real state properties received in payment of trade<br />
receivables. CEMEX recognized, under MFRS, impairment losses in connection with assets held for sale in 2010 and 2009 for approximately<br />
Ps420 (US$31) and Ps253 (US$19) respectively, which were included in the consolidated statement of operations under both MFRS and U.S.<br />
GAAP for the respective periods.<br />
(i) Stock Award Programs<br />
The balance of options outstanding at December 31, 2010 and 2009 and other general information regarding CEMEX's stock awards is<br />
presented in note 17.<br />
F-72