Cemex 2009 Annual Report Download - page 55

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Changes in goodwill in 2009, 2008 and 2007, excluding effects from the discontinued Australian assets (note 4B), are as follows:
2009 2008 2007
Balance at beginning of period $ 157,541 142,344 56,546
Increase for business acquisitions 504 1,289 88,440
Disposals (414) (187) –
Impairment losses (note 12B) – (18,314) –
Inflation effects and foreign exchange translation adjustments 1 (6,804) 32,409 (2,642)
Balance at end of period $ 150,827 157,541 142,344
1 The amounts presented in this line item refer to the effects on goodwill from foreign exchange fluctuations during the period between the reporting units’ currencies and
the Mexican peso, and the effect of the restatement into constant pesos until December 31, 2007.
Based on impairment tests made during the last quarter of the year, no goodwill impairment losses were determined in 2009. As mentioned in note 12B,
during 2008, based on impairment tests made during the last quarter of such year, goodwill impairment losses were determined in reporting units located
in the United States, Ireland and Thailand for approximately $17,476 (US$1,272). In addition, considering that the investment in CEMEX Venezuela expected
to be recovered through means different from use (note 12A), in 2008, CEMEX recognized an impairment loss of approximately $838 (US$61) associated
with the goodwill of this investment. The increase in goodwill in 2007 resulted from the acquisition of Rinker.
Intangible assets of definite life
Changes in balances of intangible assets of definite life in 2009, 2008 and 2007, excluding effects from the discontinued Australian assets (note 4B), were
as follows:
2009 2008 2007
Balance at beginning of period $ 45,303 40,577 8,610
Increase for business acquisitions 1 5 404 30,794
Additions (disposals), net 2 47 1,445 3,440
Amortization (4,350) (4,088) (2,654)
Impairment losses 3 (42) (1,598) –
Inflation effects and foreign exchange translation adjustments (1,710) 8,563 387
Balance at end of period $ 39,253 45,303 40,577
1 Through the acquisition of Rinker in 2007, CEMEX identified and valued intangible assets in the United States related to extraction permits in the cement, aggregates
and ready-mix concrete sectors for approximately $22,426 with an estimated useful life of 30 years; trademarks and commercial names for approximately $3,981 with an
estimated useful life of 5 years; and intangibles based on customer relations for approximately $4,387 which were assigned a useful life of 10 years.
2 CEMEX capitalized the costs incurred in the development stage of internal-use software for $161 in 2009, $1,236 in 2008 and $3,034 in 2007, respectively, related to the
replacement of the technological platform in which CEMEX executes the most important processes of its business model. The items capitalized refer to direct costs incurred
in the development phase of the software and relate mainly to professional fees, direct labor and related travel expenses.
3 Considering impairment indicators, during the last quarter of 2008, CEMEX tested intangible assets of definite life for impairment in the United States, and determined that
the carrying amount of names and commercial trademarks exceeded their value in use, resulting in an impairment loss of approximately $1,598.
12A) Main acquisitions and divestitures in 2009, 2008 and 2007
Sale of assets in Australia
During 2009, CEMEX sold its Australian operations (notes 2 and 4B).
Nationalization of CEMEX Venezuela
On June 18, 2008, the Government of Venezuela promulgated a presidential decree (the “Nationalization Decree”) which set forth that the cement production
industry in Venezuela had been reserved to the State and ordered the conversion of foreign-owned cement companies, including CEMEX Venezuela, S.A.C.A.
(“CEMEX Venezuela”), into state controlled companies with Venezuela holding an equity interest of at least 60%. The Nationalization Decree established
August 17, 2008 as the deadline for the controlling stockholders of foreign-owned companies to reach an agreement with the Government of Venezuela on
the compensation for the nationalization. The Nationalization Decree stipulated that if an agreement was not reached, Venezuela shall assume exclusive
operational control of the relevant cement company and the Venezuelan National Executive shall decree the expropriation of the relevant shares according
to the Venezuelan expropriation law. CEMEX controlled and operated CEMEX Venezuela until August 17, 2008. Afterwards, the Government of Venezuela
ordered the confiscation of all business, assets and shares of CEMEX Venezuela and took control of its facilities on August 18, 2008.
In August 2008, CEMEX received from the Government of Venezuela a compensation proposal for US$650. CEMEX decided not to accept such proposal,
believing that it significantly undervalued its business in Venezuela. This proposal was significantly lower than those offered to other foreign companies for
their assets in Venezuela, considering price per ton of installed capacity as well as operating cash flow multiples. In October 2008, CEMEX’s subsidiaries
in Holland, which held CEMEX’s shares in CEMEX Venezuela, submitted a complaint seeking international arbitration to the International Centre for
Settlement of Investment Disputes following the Venezuelan Government’s confiscation of assets, deprivation of rights of CEMEX Venezuela and the
initiation of the expropriation of CEMEX’s Venezuelan business. At December 31, 2009 and 2008, except for the goodwill impairment loss recognized in
2008 (note 12B), CEMEX has not made any impairment adjustments to its investment in Venezuela, remaining confident that it will eventually reach an
agreement and obtain fair compensation. Nevertheless, CEMEX carefully evaluates the evolution of the arbitration process and other negotiations to
determine if the carrying amount requires an impairment adjustment.