Cemex 2009 Annual Report Download - page 87

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As of December 31, 2009, tax loss carryforwards were as follows:
Amount of Year of
Year in which tax loss occurred carryforwards expiration
2001 $ 2,178 2011
2002 7,165 2012
2003 5,225 2013
2004 51 2014
2005 359 2015
2006 and thereafter 24,475 2016
$ 39,453
BAT levied in excess of income tax for the period may be recovered, restated for inflation, in any of the succeeding ten years, provided that the income
tax incurred exceeds BAT in such period. The Parent Company determines income tax on a consolidated basis; consequently, it calculated and presented
consolidated BAT through the 2007 tax period. As of December 31, 2009, the recoverable BAT was $139 and expires in 2016.
Deferred income tax
The valuation method for deferred income taxes is detailed in note 3N. Deferred income taxes for the period represent the difference between the
balances, in nominal pesos, of deferred income at the beginning and the end of the period. As of December 31, 2009 and 2008, the income tax effects of
the main temporary differences that generated the deferred income tax assets and liabilities of the Parent Company are presented below:
2009 2008
Deferred tax assets:
Tax loss and tax credit carryforwards $ 11,047 6,360
Recoverable BAT 139 139
Advances 585 120
Derivative financial instruments 524 3,095
Gross deferred tax assets 12,295 9,714
Less – valuation allowance (749) (139)
Total deferred tax asset, net 11,546 9,575
Deferred tax liabilities:
Land and buildings (489) (494)
Derivative financial instruments (99) (2,788)
Investment in associates (1,053) (1,045)
Total deferred tax liabilities (1,641) (4,327)
Net active position of deferred taxes $ 9,905 5,248
The change in deferred income taxes during 2009 include $585 related to the effect generated by the future tax deduction of the portion of the convertible
securities (note 2), which was recorded in “Other equity reserves,” and $4,626 related to the new income tax law. The Parent Company’s management
considers that sufficient taxable income will be generated to realize the tax benefits associated with the deferred income tax assets, and the tax loss
carryforwards, prior to their expiration. In the event that present conditions change, and it is determined that future operations would not generate enough
taxable income, or that tax strategies are no longer viable, the valuation allowance would be increased against the results of the period. The Parent
Company does not recognize a deferred tax liability for the undistributed earnings generated by its subsidiaries recognized under the equity method,
considering that such undistributed earnings are expected to be reinvested, not generating income tax in the foreseeable future. Likewise, the Parent
Company does not recognize a deferred income tax liability related to its investments in subsidiaries considering that the Parent Company controls the
reversal of the temporary differences arising from these investments.
Reconciliation of effective tax rate
The effects of inflation are recognized differently for income tax and for accounting purposes. This situation, and other differences between the financial
reporting and the corresponding tax basis of assets and liabilities, give rise to permanent differences between the approximate statutory tax rate and the
effective tax rate presented in the Parent Company’s income statements. As of December 31, 2009, 2008 and 2007, these differences were as follows:
2009 2008 2007
% % %
Effective Parent Company statutory tax rate 28.0 (28.0) 28.0
Equity in income of subsidiaries and associates (166.9) (88.4) (30.8)
Valuation allowance for tax loss carryforwards 31.0 (5.6) 6.6
Benefit for tax consolidation – (45.6) (5.0)
Inflation adjustments 46.0 14.0 1.2
Others 89.7 (26.8) 0.6
Parent Company’s effective tax rate 27.8 (180.4) 0.6
K. Stockholders’ equity
The consolidated controlling stockholders’ equity is the same as the Parent Company’s stockholders’ equity. Therefore, stockholders’ equity information
detailed in note 17 to the consolidated financial statements also refers to the Parent Company, except for non-controlling interest and the perpetual bonds,
which refer exclusively to the consolidated entity and cumulative initial effect of deferred taxes.