Cemex 2013 Annual Report Download - page 32

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CEMEX uses derivative financial instruments (“derivative
instruments”) related to interest and currency rates; com-
modity prices for the purpose of managing specific risks
associated with our portfolio (asset, liability, income, ex-
pense or other forecasted transactions); as well as equity
derivatives associated with convertible obligations entered
into by CEMEX, or in relation to compensation plans.
Under International Financial Reporting Standards (IFRS),
CEMEX is required to recognize all derivative financial
instruments on the balance sheet as assets or liabilities
at their estimated fair market value, with changes in such
fair market values recorded in the income statement,
except when transactions are entered into for cash-
flow-hedging purposes. In which case, changes in the fair
market value of the related derivative instruments are
recognized temporarily in equity and then reclassified into
earnings as the inverse effects of the underlying hedged
items flow through the income statement. As of Decem-
ber 31, 2013, in connection with the fair market value
recognition of its derivatives portfolio, CEMEX recognized
increases in its assets and liabilities, resulting in a net as-
set of US$442 million, including a liability of US$39 mil-
lion corresponding to an embedded derivative related to
our mandatorily convertible securities; which, according
to our debt agreements, is presented net of the assets
associated with the derivative instruments. The notional
amounts of derivatives substantially match the amounts
of underlying assets, liabilities, or equity transactions into
which the derivatives are being entered.
The following table shows the notional amount for each
type of derivative instrument and the aggregate fair
market value for all of CEMEX’s derivative instruments as
of December 31, 2013.
Millions of US dollars as of December 31, 2013
2013
Notional amounts of equity related derivatives1,2 2,410
Estimated aggregate fair market value1,2,3,4 409
1 Excludes an interest-rate swap related to our long-term energy
contracts. As of December 31, 2013, the notional amount of this
derivative was US$174 million, with a positive fair market value of
approximately US$33 million.
2 As of December 31, 2012, includes a notional amount of US$360 mil-
lion in connection with a guarantee by CEMEX of a financial transaction
entered into by its employees’ pension fund trust. As of December 31,
2012, the fair market value of this financial guarantee represented a
liability of US$58 million, which is net of a collateral deposit of US$76
million. As of December 31, 2013, there is no guarantee.
3 Net of cash collateral deposited under open positions. Cash collateral
was US$7 million as of December 31, 2013.
4 As required by IFRS, the estimated aggregate fair market value as of
December 31, 2013, includes a liability of US$39 million relating to
an embedded derivative in CEMEX’s mandatorily convertible securi-
ties; while the estimated aggregate fair market value as of December
31, 2012, includes a liability of US$365 million related to an embed-
ded derivative in CEMEX’s optional convertible subordinated notes.
Derivative instruments
Currency denomination of
total debt plus perpetual
notes (percentage as of
December 31, 2013)
87
11
2
l US dollar
l Euro
Mexican peso
Palomino Hydroelectric Project, Dominican Republic
[31]