Cemex 2013 Annual Report Download - page 51

Notes to the consolidated financial statements
2B) Principles of consolidation
EffectiveJanuary1,2013,IFRS10,Consolidatednancialstatements(“IFRS10”),whichestablishestheconceptofcontrolasthedetermining
factorinwhetheranentityshouldbeincludedwithintheconsolidatednancialstatements,replacedtheconsolidationrequirementsinIAS
27,
Consolidated andseparatenancialstatements, andinSIC 12, Consolidation — SpecialPurposeEntities .According toIFRS 10,the
consolidatednancialstatementsincludethoseofCEMEX,S.A.B.deC.V.andthoseoftheentities,includingSpecialPurposeEntities(“SPEs”),
inwhichtheParentCompanyexercisescontrol,bymeansofwhichtheParentCompanyisexposed,orhasrights,tovariablereturnsfromits
involvementwiththeinvesteeandhastheabilitytoaffectthosereturnsthroughitspowerovertheinvestee.Amongotherfactors,controlis
evidencedwhentheParentCompany:a)holdsdirectlyorthroughsubsidiaries,morethan50%ofanentity’scommonstock;b)hasthepower,
directlyorindirectly,togoverntheadministrative,nancialandoperatingpoliciesofanentity,orc)istheprimaryreceptoroftherisksand
rewardsofaSPE.TheadoptionofIFRS10didnotrepresentanysignicantimpactonCEMEX’sconsolidatednancialstatements.Balances
andoperationsbetweenrelatedpartiesareeliminatedinconsolidation.
PursuanttoIAS28,
Investmentsinassociatesandjointventures (“IAS28”),investmentsinassociatesareaccountedforbytheequitymethod
whenCEMEXhassignicantinuence,whichisgenerallypresumedwithaminimumequityinterestof20%,unlessitisproveninunusualcases
thatCEMEXhassignicantinuencewithalowerpercentage.Theequitymethodreectsinthenancialstatementstheinvestment’soriginal
costandtheproportionalinterestoftheholdingcompanyintheassociate’sequityandearningsafteracquisition,considering,ifapplicable,
theeffectsofination.EffectiveJanuary1,2013,IFRS11,
Jointarrangements (“IFRS11”),pursuanttowhichtheclassicationofajoint
arrangementismadebyassessingitsresultingrightsandobligations,replacedtheaccountingrulesforthesearrangementssetforthbyIAS
28.AccordingtoIFRS11,thenancialstatementsofjointventures,whicharethosejointarrangementsinwhichCEMEXandotherthird-
partyinvestorshaveagreedtoexercisejointcontrolandhaverightstothenetassetsofthearrangement,arerecognizedundertheequity
method,whereas,thenancialstatementsofjointoperations,inwhichthepartiesthathavejointcontrolofthearrangementhaverightsto
theassetsandobligationsfortheliabilitiesrelatingtothearrangement,areproportionallyconsolidatedline-by-line.TheadoptionofIFRS11
didnotrepresentanysignicantimpactonCEMEX’sconsolidatednancialstatements.Theequitymethodisdiscontinuedwhenthecarrying
amountoftheinvestment,includinganylong-terminterestintheassociateorjointventure,reacheszero,unlessCEMEXhasincurredor
guaranteedadditionalobligationsoftheassociateorjointventure.
OtherinvestmentsofapermanentnaturewhereCEMEXholdsequityinterestsoflessthan20%and/orthereisnosignicantinuenceare
carriedattheirhistoricalcost.
2C) Use of estimates and critical assumptions
ThepreparationofnancialstatementsinaccordancewithIFRSprinciplesrequiresmanagementtomakeestimatesandassumptionsthat
affectreportedamountsofassetsandliabilitiesandthedisclosureofcontingentassetsandliabilitiesatthedateofthenancialstatements,
aswellasthereportedamountsofrevenuesandexpensesduringtheperiod.Theseassumptionsarereviewedonanongoingbasisusing
availableinformation.Actualresultscoulddifferfromtheseestimates.
Themainitemssubjecttoestimatesandassumptionsbymanagementinclude,amongothers,impairmenttestsoflong-livedassets,allowances
fordoubtfulaccountsandinventories,recognitionofdeferredincometaxassets,aswellasthemeasurementofnancialinstrumentsatfair
value,andtheassetsandliabilitiesrelatedtoemployeebenets.Signicantjudgmentbymanagementisrequiredtoappropriatelyassessthe
amountsoftheseassetsandliabilities.
2D) Foreign currency transactions and translation of foreign currency nancial statements
AccordingtoIAS21,
Theeffectsofchangesinforeignexchangerates (“IAS21”),transactionsdenominatedinforeigncurrenciesarerecorded
inthefunctionalcurrencyattheexchangeratesprevailingonthedatesoftheirexecution.Monetaryassetsandliabilitiesdenominatedin
foreigncurrenciesaretranslatedintothefunctionalcurrencyattheexchangeratesprevailingatthebalancesheetdate,andtheresulting
foreignexchangeuctuationsarerecognizedinearnings,exceptforexchangeuctuationsarisingfrom:1)foreigncurrencyindebtedness
directlyrelatedtotheacquisitionofforeignentities;and2)uctuationsassociatedwithrelatedparties’balancesdenominatedinforeign
currency,whichsettlementisneitherplannednorlikelytooccurintheforeseeablefutureandasaresult,suchbalancesareofapermanent
investmentnature.Theseuctuationsarerecordedagainst“Otherequityreserves,”aspartoftheforeigncurrencytranslationadjustment
(note20B)untilthedisposaloftheforeignnetinvestment,atwhichtime,theaccumulatedamountisrecycledthroughthestatementof
operationsaspartofthegainorlossondisposal.
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