Cemex 2009 Annual Report Download - page 73

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B) Other equity reserves
As of December 31, 2009 and 2008, the balance of other equity reserves is summarized as follows:
2009 2008
Cumulative translation effect and deficit in equity restatement, net 1 $ 26,863 35,084
Issuance of convertible securities 2 1,971 –
Treasury shares held by subsidiaries (187) (6,354)
$ 28,647 28,730
1 The results from holding non-monetary assets as of December 31, 2007 were reclassified to “Retained earnings” as a result of the adoption of MFRS B-10 in 2008 (note 3A).
2 Represents the equity component associated with the issuance of convertible securities into shares of CEMEX, S.A.B. de C.V. described in note 13A, as determined under
MFRS C-12 “Financial instruments with characteristics of liability, equity or both.” Upon mandatory conversion of the securities, this balance will be reclassified to common
stock and additional paid-in capital.
For the years ended December 31, 2009, 2008 and 2007, the translation effect included in the statement of changes in stockholders’ equity were as
follows:
2009 2008 2007
Foreign currency translation adjustment 1 $ (17,553) 106,190 3,186
Foreign exchange fluctuations from debt 2 2,158 (9,407) (400)
Foreign exchange fluctuations from intercompany balances 3 14,654 (65,796) 141
$ (741) 30,987 2,927
1 These effects refer to the result from the translation of the financial statements of foreign subsidiaries.
2 Generated by foreign exchange fluctuations over a notional amount of debt in CEMEX, S.A.B. de C.V. associated with the acquisition of foreign subsidiaries and designated
as hedge of the net investment in foreign subsidiaries. The average amount of such debt was approximately US$3,200 in 2009, US$3,656 in 2008 and US$2,188 in 2007.
3 Refers to foreign exchange fluctuations arising from balances of related parties in foreign currencies that are of a long-term investment nature considering that their
liquidation is not anticipated in the foreseeable future, of which a loss of $4,857 in 2008 was recognized in CEMEX, S.A.B. de C.V.
C) Retained earnings
As a result of the initial effect in 2009 from the adoption of the new income tax law (note 16A), as well as reclassifications and cumulative initial effects
from the adoption of new MFRS beginning on January 1, 2008 (note 3O), as of December 31, 2009 and 2008, the balance of retained earnings decreased
for aggregate amounts of $2,245 and $107,843, respectively. Retained earnings include a share repurchase reserve in 2008 in the amount of $6,000.
Net income for the year is subject to a 5% allocation toward a legal reserve until such reserve equals one fifth of the common stock. As of December 31, 2009,
the legal reserve amounted to $1,804.
D) Non-controlling interest and perpetual debentures
Non-controlling interest
Non-controlling interest represents the share of non-controlling stockholders in the results and equity of consolidated subsidiaries. As of December 31, 2009
and 2008, non-controlling interest amounted to approximately $3,838 and $5,080, respectively.
Perpetual debentures
As of December 31, 2009 and 2008, consolidated balance sheets included approximately US$3,045 ($39,859) and US$3,020 ($41,495), respectively,
representing the notional amount of perpetual debentures. These debentures have no fixed maturity date and do not represent a contractual payment
obligation for CEMEX. As a result, these debentures, issued entirely by Special Purpose Vehicles (“SPVs”), qualify as equity instruments and are classified
within non-controlling interest, as they were issued by consolidated entities. In addition, CEMEX has the unilateral right to defer indefinitely the payment
of interest due on the debentures. The definition of the debentures as equity instruments was made under applicable IFRS, which were applied to these
transactions in compliance with the supplementary application of IFRS in Mexico. Issuance costs, as well as interest expense, which is accrued based
on the principal amount of the perpetual debentures, were included within “Other equity reserves” and represented expenses of approximately $2,704 in
2009, $2,596 in 2008 and $1,847 in 2007. The different SPVs were established solely for purposes of issuing the perpetual debentures and were included
in CEMEX’s consolidated financial statements.
As of December 31, 2009, CEMEX’s perpetual debentures were as follows:
Issuer Issuance Date Nominal Amount Repurchase Option Interest Rate
C10-EUR Capital (SPV) Ltd. May 2007 € 730 Tenth anniversary 6.3%
C8 Capital (SPV) Ltd. February 2007 US$750 Eighth anniversary 6.6%
C5 Capital (SPV) Ltd. December 2006 US$350 Fifth anniversary 6.2%
C10 Capital (SPV) Ltd. December 2006 US$900 Tenth anniversary 6.7%
As mentioned in note 13C, as of December 31, 2008, there were derivative instruments associated with the perpetual debentures, through which CEMEX
changed the risk profile associated with interest rates and foreign exchange rates in respect of the debentures from the U.S. dollar and euro to the
Japanese yen. These derivative instruments were settled during 2009.