Cemex 2009 Annual Report Download - page 46

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U) Emission rights: european emission trading system to reduce greenhouse gas emissions
CEMEX, as a cement producer, is involved in the European Emission Trading Scheme (“EU ETS”), which aims to reduce carbon-dioxide emissions (“CO2”).
Under this directive, governments of the European Union (“EU”) countries grant, currently at nil cost, CO2 emission allowances (“EUAs”). If CO2 emissions
were to exceed EUAs received, CEMEX would then be required to purchase the deficit of EUAs in the market, which would represent an additional
production cost. The EUAs granted by any member state of the EU can be used to settle emissions in another member state. Consequently, CEMEX manages
its portfolio of EUAs held on a consolidated basis for its cement production operations in the EU. In addition, the United Nations environmental agency
grants Certified Emission Reductions (“CERs”) to qualified CO2 emission reduction projects. These certificates may be used in specified proportions to settle
EUAs obligations with the EU ETS. As of December 31, 2009, CEMEX is developing several projects to reduce CO2 emissions that generate CERs.
CEMEX’s accounting policy to recognize the effects derived from the EU ETS, in the absence of a MFRS or an IFRS that defines an accounting recognition
for these schemes, is the following: a) EUAs received from different EU countries are recognized at cost; this presently means at zero value; b) any revenues
received from the sale of any surplus of EUAs are recognized, decreasing cost of sales; c) EUAs and/or CERs acquired to hedge current CO2 emissions for
the period are recognized at cost as intangible assets, and are amortized to cost of sales during the remaining compliance period; d) EUAs and/or CERs
acquired for trading purposes are recognized at cost as financial assets and are restated at their market value as of the balance sheet date, recognizing
changes in valuation within “Results from financial instruments”; e) CEMEX accrues a provision against cost of sales when the estimated annual emissions
of CO2 are expected to exceed the number of EUAs, net of any benefit in the form of EUAs and/or CERs obtained through exchange transactions; and
f) forward purchase and sale transactions of EUAs and/or CERs to hedge deficits, or to dispose of certain surpluses, are treated as contingencies and are
recognized at the amount paid or received upon physical settlement; meanwhile, forward transactions entered into for trading purposes are treated as
financial instruments and are recognized as assets or liabilities at their estimated fair value. Changes in valuation are recognized within “Results from
financial instruments.”
The second phase of the EU ETS began on January 1, 2008, comprising 2008 through 2012. CEMEX originally expected to receive from the governments
an insufficient number of EUAs for the complete phase. However, even though there were reductions in some countries of the number of EUAs received
as compared to phase one, the combined effect of alternate fuels that help reduce the emission of CO2 and the downturn in production estimates in the
European region during the second phase, as a result of the global economic crisis, which deepened beginning in September 2008, has generated an
excess of EUAs received over the estimated CO2 emissions during the second phase. From the consolidated surplus, nearly 13.1 million EUAs were sold
during 2009 and 2008, with the Company receiving revenues of approximately $961 and $3,666, respectively, recognized in the cost of sales by decreasing
energy costs.
As of December 31, 2008, CEMEX had contracts for the sale of 220,000 EUAs to be physically settled in December 2012 and a net aggregate amount
of approximately €42 (US$59 or $807), as well as contracts for the exchange of EUAs for CERs, to be physically settled in December 2012, having a
positive effect on CEMEX of approximately 1 million CERs. During 2009, CEMEX anticipatively settled these contracts in cash for the exchange of EUAs
for CERs, resulting in no significant gains or losses. In addition, as of December 31, 2008, there were contracts for the sale of approximately 2.5 million
EUAs settled during the first quarter of 2009, and the number of EUAs is included in the aggregate amount disclosed in the preceding paragraph. As
of December 31, 2007, at the end of phase one of the EU ETS, CEMEX maintained a consolidated excess of EUAs over CO2 emissions. During 2007 CEMEX
purchase and sale transactions of EUAs were not significant.
V) Concentration of credit
CEMEX sells its products primarily to distributors in the construction industry, with no specific geographic concentration within the countries in which
CEMEX operates. As of December 31, 2009, 2008 and 2007, no single customer individually accounted for a significant amount of the reported amounts
of sales or in the balances of trade receivables. In addition, there is no significant concentration of a specific supplier relating to the purchase of raw
materials.
W) Newly issued financial reporting standards
In 2009, the CINIF issued the following MFRS, effective beginning January 1, 2010 or 2011, as indicated below:
MFRS C-1, “Cash and cash equivalents” (“MFRS C-1”)
New MFRS C-1, which supersedes Bulletin C-1, “Cash,” becomes effective beginning January 1, 2010. The main change is, in addition to certain changes
to the terminology, the presentation within the caption of “Cash and cash equivalents” in the balance sheet of restricted cash and cash equivalents. CEMEX
does not anticipate any material impact as a result of the adoption of new MFRS C-1 in 2010.
MFRS B-5, “Financial information by segments” (“MFRS B-5”)
New MFRS B-5 supersedes Bulletin B-5, “Financial information by segments.” The most significant changes beginning on January 1, 2011 are the
following: (i) companies should disclose information by operating segment which is usually used by top management, in addition to the current disclosure
of information by products or services and geographical segments; (ii) the requirement that companies disclose information by primary and secondary
segments will be eliminated; (iii) a business in pre-operative stage may be considered as an operating segment; (iv) disclosure by segments of financial
income and expenses will be required, as well as other components of Comprehensive Financial Result; and (v) disclosure of liabilities by operating
segment will be required. CEMEX does not anticipate any material impact as a result of the adoption of new MFRS B-5 in 2011.
MFRS B-9, “Interim Financial Reporting” (“MFRS B-9”)
New MFRS B-9 supersedes Bulletin B-9, “Interim Financial Reporting.” The most significant changes beginning on January 1, 2011 are the following:
(i) MFRS B-9 requires the statement of changes in stockholders’ equity and the statement of cash flows in addition to the balance sheet and the income
statements; and (ii) requires for all financial statements that information presented for interim periods be compared to the equivalent interim period for the
immediate previous year, and in the case of the balance sheet also to be compared to the balance sheet as of the end of the immediate prior year. CEMEX
does not anticipate any material impact as a result of the adoption of new MFRS B-9 in 2011.