Cemex 2009 Annual Report Download - page 45

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Non-controlling interest and perpetual debentures (note 17D)
Includes the share of non-controlling stockholders in the results and equity of consolidated subsidiaries. Likewise, this caption includes the notional amount
of financial instruments (perpetual notes) issued by consolidated entities that qualify as equity instruments because there is: a) no contractual obligation
to deliver cash or another financial asset; b) no predefined maturity date; and c) an unilateral option to defer interest payments or preferred dividends for
indeterminate periods.
P) Revenue recognition
CEMEX’s consolidated net sales represent the value, before tax on sales, of products and services sold by consolidated subsidiaries as a result of ordinary
activities, after the elimination of transactions between related parties. Revenues are quantified at the fair value of the consideration received or receivable,
decreased by any trade discounts or volume rebates granted to customers.
Revenue from the sale of goods and services is recognized upon shipment of products or through goods delivered or services rendered to customers, when
there is no condition or uncertainty implying a reversal thereof, and they have assumed the risk of loss. Income generated from trading activities, in which
CEMEX acquires finished goods from a third party and subsequently sells the good to another third party, are recognized on a gross basis, considering that
CEMEX assumes the total risk of property on the goods purchased, not acting as agent or commissioner. Costs and expenses incurred in trading activities
are recognized within either cost of sales, administrative, selling and distribution expenses, as appropriate.
Q) Cost of sales, administrative expenses and selling and distribution expenses
In 2009 and 2008, cost of sales represents the production cost of inventories at the moment of sale. Until 2007, cost of sales represented the lower of
the replacement or production cost of inventories. Such cost of sales includes depreciation, amortization and depletion of assets involved in production,
expenses related to storage in producing plants and freight of raw material between plants. Cost of sales excludes expenses related to personnel,
equipment and services involved in sale activities, storage of product at points of sales as well as freight of finished product between plants and points
of sale, which are recognized within administrative and selling expenses. Likewise, cost of sales excludes freight expenses between points of sales and
customers’ facilities, which are recognized within distribution expenses.
The “Administrative and selling expenses” line item in the income statements includes transfer costs from CEMEX’s producing plants to its selling points, as
well as costs related to warehousing of products at the selling points. For the years ended December 31, 2009, 2008 and 2007, selling expenses amounted
to $9,310, $11,079 and $10,371, respectively. Distribution expenses refer to freight of finished products between points of sale and the customers’
facilities.
R) Monetary position result
The monetary position result, which represents the gain or loss from holding monetary assets and liabilities in high-inflation environments, is determined
by applying the inflation rate of the country of each subsidiary in a high-inflation environment to its net monetary position (difference between monetary
assets and liabilities). Until December 31, 2007, this effect was determined for all subsidiaries without considering the inflation level.
S) Other expenses, net
The caption “Other expenses, net” in the income statement consists primarily of revenues and expenses derived from transactions or events not directly
related to CEMEX’s main activity, or which are of an unusual or non-recurring nature. The most significant items included under this caption for the years
ended December 31, 2009, 2008 and 2007, were the following:
2009 2008 2007
Impairment losses (notes 8, 9, 11 and 12) $ (889) (21,125) (195)
Restructuring costs (note 14) (1,100) (3,141) (1,058)
Charitable contributions (264) (174) (367)
Current and deferred ESPS (note 3M) (8) 2,283 (246)
Results from the sale of assets and others, net (3,268) 754 (1,118)
Other expenses, net $ (5,529) (21,403) (2,984)
T) Executive stock option programs (note 18)
Beginning on January 1, 2009, CEMEX applies MFRS D-8, “Share-based payments” (“MFRS D-8”), to recognize its executive stock-based compensation
programs. Until December 31, 2008, CEMEX applied International Financial Reporting Standard 2 “Shared-based payments” (“IFRS 2”). There were no
effects upon the adoption of MFRS D-8 in 2009. Awards granted to executives are defined as equity instruments, in which services received from employees
are settled through the delivery of shares; or as liability instruments, in which the Company incurs a liability by committing to make cash payments to the
executives on the exercise date of the awards based on changes in the Company’s own stock (intrinsic value). The cost of equity instruments represents
their estimated fair value at the date of grant and is recognized in earnings during the period in which the exercise rights of the employees become vested.
In respect of liability instruments, these instruments are valued at their estimated fair value at each reporting date, recognizing the changes in valuation
through the income statement. CEMEX determines the estimated fair value of options using the binomial financial option-pricing model.
CEMEX has concluded that the options in its ”Fixed program” (note 18A) represent equity instruments considering that services received are settled through
the issuance of new shares upon exercise; meanwhile, options granted under its other programs (note 18B, C and D) represent liability instruments.