Cemex 2013 Annual Report Download - page 55

Notes to the consolidated financial statements
Startupcostsarerecognizedinthestatementsofoperationsastheyareincurred.Costsassociatedwithresearchanddevelopmentactivities
(“R&D activities”), performed by CEMEX to create products and services, as well as to develop processes, equipment and methods to
optimizeoperationalefciencyandreducecosts,arerecognizedintheoperatingresultsasincurred.TheTechnologyandEnergydepartments
inCEMEXundertakeallsignicantR&Dactivitiesaspartoftheirdailyactivities.In2013,2012and2011,totalcombinedexpensesofthese
departmentswereapproximately$494(US$38),$514(US$40)and$487(US$39),respectively.Developmentcostsarecapitalizedonly
iftheymeetthedenitionofintangibleassetmentionedabove.
Directcostsincurredinthedevelopmentstageofcomputersoftwareforinternalusearecapitalizedandamortizedthroughtheoperating
resultsovertheusefullifeofthesoftware,whichonaverageisapproximately5years.
Costsincurredinexplorationactivitiessuchaspaymentsforrightstoexplore,topographicalandgeologicalstudies,aswellastrenching,
amongotheritemsincurredtoassessthetechnicalandcommercialfeasibilityofextractingamineralresource,whicharenotsignicantto
CEMEX,arecapitalizedwhenfutureeconomicbenetsassociatedwithsuchactivitiesareidentied.Whenextractionbegins,thesecostsare
amortizedduringtheusefullifeofthequarrybasedontheestimatedtonsofmaterialtobeextracted.Whenfutureeconomicbenetsare
notachieved,anycapitalizedcostsaresubjecttoimpairment.
CEMEX’sextractionrightshavemaximumusefullivesthatrangefrom30to100years,dependingonthesector,andtheexpectedlifeof
therelatedreserves.AsofDecember31,2013,exceptforextractionrightsand/orasotherwiseindicated,CEMEX’sintangibleassetsare
amortizedonastraightlinebasisovertheirusefullivesthatrangeonaveragefrom3to20years.
2K) Impairment of long lived assets (notes 14, 15)
Impairment of property, machinery and equipment, intangible assets of denite life and other investments
Property,machineryandequipment,intangibleassetsofdenitelifeandotherinvestmentsaretestedforimpairmentupontheoccurrence
offactorssuch astheoccurrence ofasignicantadverseevent, changesinCEMEX’s operatingenvironment, changesin projecteduse
orin technology,aswellas expectationsof loweroperatingresultsforeachcash generating unit, inordertodeterminewhether their
carryingamountsmaynotberecovered.Insuchcases,animpairmentlossisrecordedintheincomestatementsfortheperiodwhensuch
determinationismadewithin“Otherexpenses,net.”Theimpairmentlossofanassetresultsfromtheexcessoftheasset’scarryingamount
overitsrecoverableamount,correspondingtothehigherofthefairvalueoftheasset,lesscoststosellsuchasset,andtheasset’svaluein
use,thelatterrepresentedbythenetpresentvalueofestimatedcashowsrelatedtotheuseandeventualdisposaloftheasset.
Signicantjudgmentbymanagementisrequiredtoappropriatelyassessthefairvaluesandvaluesinuseoftheseassets.Themainassumptions
utilizedtodeveloptheseestimatesareadiscountratethatreectstheriskofthecashowsassociatedwiththeassetsevaluatedand
theestimationsofgenerationoffutureincome.Thoseassumptionsareevaluatedforreasonablenessbycomparingsuchdiscountratesto
availablemarketinformationandbycomparingtothird-partyexpectationsofindustrygrowth,suchasgovernmentalagenciesorindustry
chambersofcommerce.
Goodwill and intangible assets of indenite life
Goodwillandotherintangibleassetsofindenitelifearetestedforimpairmentwhenrequiredduetosignicantadversechangesoratleast
onceayear,duringthelastquarterofsuchyear,bydeterminingtherecoverableamountofthegroupofcash-generatingunits(“CGUs”)to
whichgoodwillbalanceshavebeenallocated,whichconsistsofthehigherofsuchgroupofCGUsfairvalue,lesscosttosellanditsvalueinuse,
representedbythediscountedamountofestimatedfuturecashowstobegeneratedbysuchCGUstowhichgoodwillhasbeenallocated.
OtherintangibleassetsofindenitelifemaybetestedattheCGUorgroupofCGUslevel,dependingontheirallocation.CEMEXdetermines
discountedcashowsgenerallyoverperiodsof5years.Inspeciccircumstances,when,accordingtoCEMEX’sexperience,actualresultsfor
agivencash-generatingunitdonotfairlyreecthistoricalperformanceandmostexternaleconomicvariablesprovidetheCompanywith
condencethatareasonablydeterminableimprovementinthemid-termisexpectedintheiroperatingresults,managementusescashow
projectionsoveraperiodofupto10years,totheextentCEMEXhasdetailed,explicitandreliablenancialforecastsandiscondentandcan
demonstrateitsability,basedonpastexperience,toforecastcashowsaccuratelyoverthatlongerperiod.Thenumberofadditionalperiods
abovethestandardperiodof5yearsofcashowprojectionsupto10yearsisdeterminedbytheextenttowhichfutureexpectedaverage
performanceresemblesthehistoricalaverageperformance.IfthevalueinuseofagroupofCGUstowhichgoodwillhasbeenallocatedislower
thanitscorrespondingcarryingamount,CEMEXdeterminesthefairvalueofsuchgroupofCGUsusingmethodologiesgenerallyacceptedinthe
markettodeterminethevalueofentities,suchasmultiplesofOperatingEBITDAandbyreferencetoothermarkettransactions,amongothers.
Animpairmentlossisrecognizedwithinotherexpenses,net,iftherecoverableamountislowerthanthenetbookvalueofthegroupofCGUs
towhichgoodwillhasbeenallocated.Impairmentchargesrecognizedongoodwillarenotreversedinsubsequentperiods.
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