Cemex 2009 Annual Report Download - page 43

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Costs related to remediation of the environment (notes 14 and 21)
CEMEX recognizes a provision when it is probable that an environmental remediation liability exists and that it will represent an outflow of resources. The
provision represents the estimated future cost of remediation. Provisions for environmental remediation costs are recognized at their nominal value when
the time schedule for the disbursement is not clear, or when the economic effect for the passage of time is not significant; otherwise, such provisions are
recognized at their discounted values. Reimbursements from insurance companies are recognized as assets only when their recovery is practically certain.
In that case, such reimbursement assets are not offset against the provision for remediation costs.
Contingencies and commitments (notes 20 and 21)
Obligations or losses related to contingencies are recognized as liabilities in the balance sheet when present obligations exist resulting from past events
that are expected to result in an outflow of resources and the amount can be measured reliably. Otherwise, a qualitative disclosure is included in the notes
to the financial statements. The effects of long-term commitments established with third parties, such as supply contracts with suppliers or customers,
are recognized in the financial statements on the incurred or accrued basis, after taking into consideration the substance of the agreements. Relevant
commitments are disclosed in the notes to the financial statements. The Company does not recognize contingent revenues, income or assets.
M) Employee benefits (note 15)
Employees’ statutory profit sharing
Under new MFRS D-3, “Employee Benefits” (“MFRS D-3”), beginning on January 1, 2008, current and deferred employees’ statutory profit sharing (“ESPS”)
is not considered an element of income taxes. Likewise, deferred ESPS shall be calculated applying the ESPS rate to the total temporary differences
resulting from comparing the book values and the taxable values for ESPS purposes of assets and liabilities according to applicable legislation. Until
December 31, 2007, deferred ESPS was determined considering temporary differences of a non-recurring nature, arising from the reconciliation of net
income and the taxable income of the period for ESPS purposes. The cumulative initial effect for the adoption of new MFRS D-3 as of January 1, 2008,
represented an expense of approximately $2,283, which was included within “Retained earnings.” Current and deferred ESPS is presented within “Other
expenses, net.”
Defined contribution plans
The costs of defined contribution pension plans are recognized in the operating results as they are incurred. Liabilities arising from such plans are settled
through cash transfers to the employees’ retirement accounts, without generating future obligations.
Defined benefit plans, other postretirement benefits and termination benefits
CEMEX recognizes the costs associated with employees’ benefits for: a) defined benefit pension plans; b) other postretirement benefits, basically comprised
of health care benefits, life insurance and seniority premiums, granted pursuant to applicable law or by Company grant; and c) termination benefits, not
associated with a restructuring event, which mainly represent ordinary severance payments by law. These costs are recognized in the operating results,
as services are rendered, based on actuarial estimations of the benefits’ present value. The actuarial assumptions upon which the Company’s employee
benefit liabilities are determined consider the use of real rates (nominal rates discounted by inflation). For certain pension plans, irrevocable trust funds
have been created to cover future benefit payments. These assets are valued at their estimated fair value at the balance sheet date.
The actuarial gains and losses (“actuarial results”), which exceed the greater of 10% of the fair value of the plan assets, and 10% of the present value of
the plan obligations, the prior service cost and the transition liability, are amortized to the operating results over the employees’ estimated active service
life. In accordance with the transition rules of new MFRS D-3, beginning January 1, 2008, the actuarial results, prior service costs and the transition liability
recognized as of December 31, 2007, should be amortized to the income statement in a maximum period of five years. The net periodic cost for the years
ended December 31, 2009 and 2008 includes a portion of this transition amortization.
The net periodic cost recognized in the operating results includes: a) the increase in the obligation resulting from additional benefits earned by employees
during the period; b) interest cost, which results from the increase in the liability by the passage of time; c) the amortization of the actuarial gains and
losses, prior service cost and transition liability; and d) the expected return on plan assets for the period. Beginning in 2008, the excess of amortization
expense in the net periodic pension cost resulting from the transition rule is recognized within “Other expenses, net.”
N) Income taxes (note 16)
According to MFRS D-4, “Accounting for Income Taxes” (“MFRS D-4”), the effects reflected in the income statements for income taxes include the amounts
incurred during the period as well as the amounts of deferred income taxes, in both cases determined according to the income tax law applicable to
each subsidiary. Consolidated deferred income taxes represent the addition of the amounts determined in each subsidiary under the assets and liabilities
method, by applying the enacted statutory income tax rate to the total temporary differences resulting from comparing the book and taxable values of
assets and liabilities, taking into account and subject to a recoverability analysis, tax loss carryforwards as well as other recoverable taxes and tax credits.
According to MFRS, all items charged or credited directly in stockholders’ equity are recognized net of their deferred income tax effects. The effect of a
change in enacted statutory tax rates is recognized in the income statement for the period in which the change occurs and is officially enacted.
For the recognition of deferred tax assets derived from net operating losses and their corresponding valuation reserve, CEMEX makes an assessment of:
a) the aggregate amount of self-determined tax loss carryforwards included in its income tax returns in each country that CEMEX believes the tax authorities
would not reject based on available evidence; and b) the likelihood of the recoverability of such tax loss carryforwards prior to their expiration through
an analysis of estimated future taxable income. If CEMEX believes that it is more-likely-than-not that the tax authorities would reject a self-determined
deferred tax asset, it would decrease its deferred tax assets. Likewise, if CEMEX believes that it would not be able to use a deferred tax carryforward asset
before its expiration, CEMEX would increase its valuation reserve. Both situations would result in additional income tax expense in the income statement
for the period in which such determination is made.