Cemex 2009 Annual Report Download - page 84

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82
Goodwill of the Parent Company refers to a portion of the reporting unit in Mexico (note 12). During the last quarter of 2009, 2008 and 2007, the Parent
Company made the annual test for goodwill impairment. For the years ended December 31, 2009, 2008 and 2007, the Parent Company did not recognize
impairment losses for goodwill, considering that impairment tests presented an excess of the value in use (discounted cash flows) over the carrying amount
of goodwill in the reporting unit. The projection models for cash flows to value long-lived assets include long-term variables. Nevertheless, the Parent
Company believes that its cash flow projections and the discount rates used for present value, reasonably capture current conditions at the time of the
calculations, considering that: a) the starting point of future cash flow models is the operating flow for the previous year; b) the cost of capital reflects
current risks and volatility in the markets; and c) the cost of debt represents the Parent Company’s specific interest rates observed in recent transactions.
Impairment tests are significantly sensitive to, among other factors, the estimation of future prices of CEMEX’s products, the development of operating
expenses, local and international economic trends in the construction industry, long-term growth expectations in the different markets, as well as the
discount rates and the rates of growth in perpetuity used. The Parent Company uses after-tax discount rate for its reporting unit in Mexico, which are
applied to after-tax cash flows. Undiscounted cash flows are significantly sensitive to the growth rate in perpetuity used. Likewise, discounted cash flows
are significantly sensitive to the discount rate used. The higher the growth rate in perpetuity applied, the higher the amount obtained of undiscounted future
cash flows by reporting unit. Conversely, the higher the discount rate applied, the lower the amount obtained of discounted estimated future cash flows
by reporting unit. For impairment tests in 2009 and 2008 of the reporting unit in Mexico, the Parent Company used a discount rate of 10.0% and 12.0%,
respectively, as well as a growth rate in perpetuity of 2.5% in both years.
G. Other accounts payable and accrued expenses
As of December 31, 2009 and 2008, other accounts payable and accrued expenses of the Parent Company are disclosed below:
2009 2008
Other accounts payable, accrued expenses, dividends payable and interest payable $ 355 127
Tax payable 920 543
Valuation of derivative instruments – 1,052
$ 1,275 1,722
H. Short-term and long-term debt
As of December 31, 2009 and 2008, the breakdown of the Parent Company’s short-term and long-term debt by interest rate and currency type, is presented below:
Carrying amount Effective rate 1
2009 2008 2009 2008
Short-term
Floating rate $ 3,986 15,673 4.6% 3.5%
Fixed rate – 2,741 – 9.3%
3,986 18,414
Long-term
Floating rate 50,082 46,796 5.3% 4.7%
Fixed rate 2,923 11,647 9.2% 4.7%
53,005 58,443
$ 56,991 76,857
2009 2008
Effective Effective
Short-term Long-term Total rate 1 Short-term Long-term Total rate 1
Dollars $ 291 32,764 33,055 4.7% $ 12,213 35,266 47,479 3.7%
Pesos 3,695 20,241 23,936 6.3% 6,201 23,177 29,378 5.6%
$ 3,986 53,005 56,991 $ 18,414 58,443 76,857
1 Represents the weighted average effective interest rate and includes the effects of interest rate swaps and derivative instruments that exchange interest rates and
currencies.
As of December 31, 2009 and 2008, the Parent Company’s short-term debt included $3,186 and $8,830, respectively, representing current maturities of
long-term debt.
The maturities of the Parent Company’s long-term debt as of December 31, 2009, which reflect the amortization of debt under the Financing Agreement
(note 13A), are as follows:
Parent
2011 $ 9,961
2012 11,066
2013 8,246
2014 23,053
2015 and thereafter 679
$ 53,005
The Parent Company’s debt contracts contain restrictive covenants calculated on a consolidated basis requiring, among others, the compliance with
financial ratios and tests, which are detailed in note 13A.