Cemex 2009 Annual Report Download - page 82

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25. NOTES TO PARENT COMPANY-ONLY FINANCIAL STATEMENTS
A. Description of business
CEMEX, S.A.B. de C.V. is a Mexican corporation, a holding company (parent) of entities whose main activities are oriented to the construction industry,
through the production, marketing, distribution and sale of cement, ready-mix concrete, aggregates and other construction materials. CEMEX is a public
stock corporation with variable capital (S.A.B. de C.V.) organized under the laws of the United Mexican States, or Mexico.
CEMEX, S.A.B. de C.V. was founded in 1906 and was registered with the Mercantile Section of the Public Register of Property and Commerce in Monterrey,
N.L., Mexico in 1920 for a period of 99 years. In 2002, this period was extended to the year 2100. The shares of CEMEX, S.A.B. de C.V. are listed on the
Mexican Stock Exchange (“MSE”) as Ordinary Participation Certificates (“CPOs”). Each CPO represents two series “A” shares and one series “B” share
of common stock of CEMEX, S.A.B. de C.V. In addition, CEMEX, S.A.B. de C.V. shares are listed on the New York Stock Exchange (“NYSE”) as American
Depositary Shares or “ADSs” under the symbol “CX.” Each ADS represents ten CPOs.
The terms “CEMEX, S.A.B. de C.V.” or the “Parent Company” used in these accompanying notes to the financial statements refer to CEMEX, S.A.B. de C.V.
without its consolidated subsidiaries. The terms the “Company” or “CEMEX” refer to CEMEX, S.A.B. de C.V. together with its consolidated subsidiaries.
The issuance of Parent Company only and consolidated financial statements was authorized by the Company’s management on January 29, 2010, and they
will be submitted for approval in the next stockholders’ meeting.
B. Significant accounting policies
The same accounting policies listed in note 3 to CEMEX S.A.B. de C.V. consolidated financial statements were applied, as applicable, in the preparation of
the Parent Company’s financial statements and subsidiaries. This note includes references to other notes to the consolidated financial statements, in those
cases in which the information also refers to the Parent Company.
Basis of presentation and disclosure
The financial statements are prepared in accordance with MFRS issued by CINIF. MFRS recognized the effects of inflation on the financial information until
December 31, 2007. Changes in inflationary accounting effective as of January 1, 2008 are explained below.
Inflationary accounting
Beginning on January 1, 2008, pursuant to MFRS B-10, “Inflation Effects” (“MFRS B-10”), the financial statements subject to restatement are those related
to an entity whose functional currency corresponds to a country in which the cumulative inflation rate over the preceding three years equals or exceeds
26% (i.e. a high-inflation environment). Until 2007, inflationary accounting was applied to all CEMEX subsidiaries regardless of the inflation level of their
respective countries. Designation of a country as operating in a high-inflation environment takes place at the end of each year, and inflation restatement
is applied prospectively.
Beginning in 2008, MFRS B-10 eliminated the restatement of the financial statements for the period as well as the comparative financial statements
for prior periods into constant amounts as of the most recent balance sheet date. In addition, beginning in 2008, the amounts in the income statements,
the statements of cash flows and the statement of changes in stockholders’ equity have been presented in nominal pesos. The amounts in the income
statement, the statement of changes in financial position and the statement of changes in stockholders’ equity for 2007 are presented in constant pesos
as of December 31, 2007, the last date in which inflationary accounting was applied to all subsidiaries. The restatement adjustments as of the date that
the inflationary accounting was discontinued are part of the carrying amounts. Pursuant to MFRS B-10, beginning in 2008, when moving back from a
low-inflation to a high-inflation environment, the initial restatement factor should consider the cumulative inflation since the last time in which inflationary
accounting was applied.
Upon adoption of MFRS B-10 on January 1, 2008, the accumulated result for holding non-monetary assets as of December 31, 2007 included in “Other
equity reserves” (note 17B) was reclassified to “Retained earnings,” representing a decrease in this caption of approximately $97,722.
Statement of cash flows
Based on MFRS B-2, beginning in 2008, the statement of cash flows was incorporated as part of the basic financial statements. This statement presents
cash inflows and outflows in nominal currency, replacing the statement of changes in financial position, which included inflation effects and unrealized
foreign exchange effects. Pursuant to MFRS B-2, the Parent Company presents statements of cash flows for 2009 and 2008, and the statement of changes
in financial position for 2007, as originally reported, in constant pesos as of December 31, 2007.
The statements of cash flows exclude the following transactions that did not represent sources or uses of cash: a) in 2009, the effects of the exchange of
CBs into mandatorily convertible securities (note 13A), which represented a net decrease in debt of $2,036 and an increase in stockholders’ equity of $1,971
(net of issuance expenses); b) in 2009 and 2008, the increase in stockholders’ equity associated with the capitalization of retained earnings for $4,373
and $6,794, respectively (note 17A); and c) in 2009, the increase in stockholders’ equity associated with CPOs issued as part of the executive stock-based
compensation for $147 (note 17A). For 2009 and 2008, the statements of cash flows include the financial expenses paid in cash as part of the financing
activities.
Definition of terms
When reference is made to “pesos” or “$”, it means Mexican pesos. Except when specific references are made to “earnings per share” and “prices per
share,” the amounts in these notes are stated in millions of pesos. When reference is made to “US$” or “dollars,” it means dollars of the United States
of America (“United States or U.S.A.”). When reference is made to “£” or “pounds,” it means British pounds sterling. When reference is made to “€” or
“euros,” it means millions of the currency in circulation in a significant number of European Union countries.