Cemex 2012 Annual Report Download - page 55

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Notes to the
consolidated
financial
statements
55
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2S) Executive stock-based compensation (note 21)
Based on IFRS 2, Share-based payments (“IFRS 2”), stock awards based on shares of CEMEX granted to executives are defined as
equity instruments when services received from employees are settled by delivering CEMEX’s shares; or as liability instruments
when CEMEX commits to make cash payments to the executives on the exercise date of the awards based on changes in
CEMEX’s own stock (intrinsic value). The cost of equity instruments represents their estimated fair value at the date of grant and
is recognized in the statements of operations during the period in which the exercise rights of the employees become vested. In
respect of liability instruments, these instruments are valued at their estimated fair value at each reporting date, recognizing the
changes in fair value through the operating results. CEMEX determines the estimated fair value of options using the binomial
financial option-pricing model.
2T) Emission rights
In some of the countries where CEMEX operates, such as in countries of the EU, governments have established mechanisms
aimed at reducing carbon-dioxide emissions (“CO2”) by means of which industries releasing CO2 must submit to the environmental
authorities at the end of a compliance period emission rights for a volume equivalent to the tons of CO2 released. Since the
mechanism for emissions reduction in the EU has been in operation, a certain number of emission rights based on historical levels
have been granted by the relevant environmental authorities to the different industries free of cost. Therefore, companies have to
buy additional emission rights to meet deficits between actual CO2 emissions during the compliance period and emission rights
actually held, or they can dispose of any surplus of emission rights in the market. In addition, the United Nations Framework
Convention on Climate Change (“UNFCCC”) grants Certified Emission Reductions (“CERs”) to qualified CO2 emission reduction
projects. CERs may be used in specified proportions to settle emission rights obligations in the EU. CEMEX actively participates in
the development of projects aimed to reduce CO2 emissions. Some of these projects have been awarded with CERs.
In the absence of an IFRS that defines an accounting treatment for these schemes, CEMEX accounts for the effects associated
with CO2 emission reduction mechanisms as follows:
• Emission rights granted by governments are not recognized in the balance sheet considering that their cost is zero.
• Revenues from the sale of any surplus of emission rights are recognized by decreasing cost of sales; in the case of forward
sale transactions, revenues are recognized upon physical delivery of the emission certificates.
• Emission rights and/or CERs acquired to hedge current CO2 emissions are recognized as intangible assets at cost, and are
further amortized to cost of sales during the compliance period. In the case of forward purchases, assets are recognized upon
physical reception of the emission certificates.
• CEMEX accrues a provision against cost of sales when the estimated annual emissions of CO2 are expected to exceed the
number of emission rights, net of any benefit obtained through swap transactions of emission rights for CERs.
• CERs received from the UNFCCC are recognized as intangible assets at their development cost, which are attributable mainly
to legal expenses incurred in the process of obtaining such CERs.
• CEMEX does not maintain emission rights, CERs and/or forward transactions with trading purposes.
The combined effect of the use of alternate fuels that help reduce the emission of CO2, and the downturn in produced cement
volumes in the EU, generated a surplus of emission rights held over the estimated CO2 emissions. From the consolidated surplus
of emission rights, during 2011 and 2010, CEMEX sold an aggregate amount of approximately 13.4 million certificates, receiving
revenues of approximately $1,518 and $1,417, respectively. During 2012, there were no sales of emission rights.
2U) Concentration of credit
CEMEX sells its products primarily to distributors in the construction industry, with no specific geographic concentration within
the countries in which CEMEX operates. As of and for the years ended December 31, 2012, 2011 and 2010, no single customer
individually accounted for a significant amount of the reported amounts of sales or in the balances of trade receivables. In
addition, there is no significant concentration of a specific supplier relating to the purchase of raw materials.