Cemex 2012 Annual Report Download - page 52

Notes to the
consolidated
financial
statements
52
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Contingencies and commitments (notes 23 and 24)
Obligations or losses related to contingencies are recognized as liabilities in the balance sheet when present obligations exist
resulting from past events that are expected to result in an outflow of resources and the amount can be measured reliably.
Otherwise, a qualitative disclosure is included in the notes to the financial statements. The effects of long-term commitments
established with third parties, such as supply contracts with suppliers or customers, are recognized in the financial statements
on an incurred or accrued basis, after taking into consideration the substance of the agreements. Relevant commitments are
disclosed in the notes to the financial statements. The Company does not recognize contingent revenues, income or assets.
2N) Pensions and postretirement employee benefits (note 18)
Defined contribution pension plans
The costs of defined contribution pension plans are recognized in the operating results as they are incurred. Liabilities arising
from such plans are settled through cash transfers to the employees’ retirement accounts, without generating future obligations.
Defined benefit pension plans, other postretirement benefits and termination benefits
Based on IAS 19, Employee benets (“IAS19”), CEMEX recognizes the costs associated with employees’ benefits for: a) defined
benefit pension plans; and b) other postretirement benefits, basically comprised of health care benefits, life insurance and seniority
premiums, granted by CEMEX and/or pursuant to applicable law. These costs are recognized as services are rendered, based on
actuarial estimations of the benefits’ present value with the advice of external actuaries. The actuarial assumptions consider
the use of nominal rates. For certain pension plans, irrevocable trust funds have been created to cover future benefit payments.
These assets are valued at their estimated fair value at the balance sheet date. The expected rates of return on plan assets
are determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be
settled. Termination benefits, not associated with a restructuring event, which mainly represent severance payments by law, are
recognized in the operating results for the period in which they are incurred.
The service cost, corresponding to the increase in the obligation for additional benefits earned by employees during the period, is
recognized within operating costs and expenses. The interest cost related to the increase in the liability by the passage of time, as
well as the expected return on plan assets for the period, are recognized within “Other financial expenses, net.”
The effects from modifications to the pension plans that affect the cost of past services are recognized within operating costs
and expenses during the periods in which such modifications become effective with respect to the employees, or without delay
if changes are effective immediately. Likewise, the effects from curtailments and/or settlements of obligations occurring during
the period, associated with events that significantly reduce the cost of future services and/or reduce significantly the population
subject to pension benefits, respectively, are recognized within operating costs and expenses.
The actuarial gains and losses, related to differences between the projected and real actuarial assumptions at the end of the
period, as well as the difference between the expected and real return on plan assets, are recognized in the period in which they
are incurred as part of other comprehensive income or loss for the period within stockholders’ equity.
2O) Income taxes (note 19)
Based on IAS 12, Income taxes (“IAS 12”), the effects reflected in the statements of operations for income taxes include the amounts
incurred during the period and the amounts of deferred income taxes, determined according to the income tax law applicable
to each subsidiary. Consolidated deferred income taxes represent the addition of the amounts determined in each subsidiary by
applying the enacted statutory income tax rate to the total temporary differences resulting from comparing the book and taxable
values of assets and liabilities, considering tax loss carryforwards as well as other recoverable taxes and tax credits, to the extent
that it is probable that future taxable profits will be available against which they can be utilized. The measurement of deferred
income taxes reflects the tax consequences that follow the manner in which CEMEX expects, at the end of the reporting period,
to recover or settle the carrying amount of its assets and liabilities. Deferred income taxes for the period represent the difference
between balances of deferred income at the beginning and the end of the period. Deferred income tax assets and liabilities relating
to different tax jurisdictions are not offset. According to IFRS, all items charged or credited directly in stockholders’ equity or as
part of other comprehensive income or loss for the period are recognized net of their current and deferred income tax effects. The
effect of a change in enacted statutory tax rates is recognized in the period in which the change is ocially enacted.