Cemex 2013 Annual Report Download - page 79

Notes to the consolidated financial statements
ThegeographicoperatingsegmentsreportedbyCEMEX(note4)representCEMEX’sgroupsofCGUstowhichgoodwillhasbeenallocated
forpurposesoftestinggoodwillforimpairment.Correspondingly,eachofCEMEX’sgeographicoperatingsegmentsiscomprisedofCEMEX’s
operationsinacountry.Eachcountryoroperatingsegmentis,inturn,comprisedofalowerlevelofcash-generatingunits,whicharenot
largerthananoperatingsegment,identiedbyCEMEXasgeographicalzoneswithinthecountryinwhichallmainbusinessactivitiesare
conducted.Forpurposesofgoodwillimpairmenttests,allcash-generatingunitswithinacountryareaggregated,asgoodwillisallocated
atthatlevel.Inordertoarriveattheseconclusions,CEMEXevaluated:a)thataftertheacquisition,goodwillisallocatedatthelevelof
thereportableoperatingsegmentandrepresentsthelowestlevelwithinCEMEXatwhichgoodwillismonitoredforinternalmanagement
purposesandreectsthewayCEMEXmanagesitsoperationsandallocatesresources;b)thatthecash-generatingunitsthatcomprisethe
reportedsegmenthavesimilareconomiccharacteristics;c)thatthereportedsegmentsareusedbyCEMEXtoorganizeandevaluateits
activitiesinitsinternalinformationsystems;d)thehomogeneousnatureoftheitemsproducedandtradedineachcash-generatingunit,
whichareallusedbytheconstructionindustry;e)theverticalintegrationinthevaluechainoftheproductscomprisingeachcomponent;
f)thetypeofclients,whicharesubstantiallysimilarinallcomponents;g)theoperativeintegrationamongcomponents;andh)thatthe
compensationsystemofaspeciccountryisbasedontheconsolidatedresultsofthegeographicoperatingsegmentandnotontheparticular
resultsofthecomponents.Consideringmaterialityfordisclosurepurposes,innote15C,certainbalancesofgoodwillwerepresentedforRest
ofNorthernEuropeorRestofSouthAmericaandtheCaribbean,butthisdoesnotrepresentthatgoodwillwastestedatalevelhigherthan
foroperationsinanindividualcountry.
Impairmenttestsaresignicantlysensitiveto,amongotherfactors,theestimationoffuturepricesofCEMEX’sproducts,thedevelopmentof
operatingexpenses,localandinternationaleconomictrendsintheconstructionindustry,thelong-termgrowthexpectationsinthedifferent
markets,aswellasthediscountratesandthelong-termgrowthratesapplied.CEMEX’scashowprojectionstodeterminethevalueinuse
ofitsCGUstowhichgoodwillhasbeenallocatedconsidertheuseoflong-termeconomicassumptions.CEMEXbelievesthatitsdiscounted
cashowprojectionsandthediscountratesusedreasonablyreectcurrenteconomicconditionsatthetimeofthecalculations,considering,
amongotherfactorsthat:a)thecostofcapitalreectscurrentrisksandvolatilityinthemarkets;andb)thecostofdebtrepresentsthe
averageofindustryspecicinterestratesobservedinrecenttransactions.OtherkeyassumptionsusedtodetermineCEMEX’sdiscounted
cashowsarevolumeandpriceincreasesordecreasesbymainproductduringtheprojectedperiods.Volumeincreasesordecreasesgenerally
reectforecastsissuedbytrustworthyexternalsources,occasionallyadjustedbasedonCEMEX’sactualbacklog,experienceandjudgment
consideringitsconcentrationincertainsectors,whilepricechangesnormallyreecttheexpectedinationintherespectivecountry.Operating
costsandexpensesduringallperiodsaremaintainedasaxedpercentofrevenuesconsideringhistoricperformance.
Duringthelastquarterof2013,2012and2011,CEMEXperformeditsannualgoodwillimpairmenttest.Basedontheseanalyses,in2013
and2012CEMEXdidnotdetermineimpairmentlossesofgoodwill,whereas,in2011,CEMEXdeterminedimpairmentlossesofgoodwillfor
approximately$145(US$12),associatedwithCEMEX’sgroupsofCGUstowhichgoodwillhasbeenallocatedinLatviarepresenting100%of
thegoodwillbalanceassociatedwithsuchcountry.Theestimatedimpairmentlosswasmainlyattributabletomarketdynamicsinthiscountry
anditspositioninthebusinesseconomiccycle,generatingthatthenetbookvalueexceededitsrespectiverecoverableamount.
AsofDecember31,2013,2012and2011,CEMEX’spre-taxdiscountratesandlong-termgrowthratesusedtodeterminethediscounted
cashowsinthegroupofCGUswiththemaingoodwillbalances,wereasfollows:
Discount rates Growth rates
Groups of CGUs 2013 2012 2011 2013 2012 2011
UnitedStates 9.8% 9.9% 10.7% 2.5% 2.5% 2.5%
Spain  11.4% 11.5% 12.0% 2.3% 2.5% 2.5%
Mexico 10.9% 10.7% 11.4% 3.8% 3.0% 2.5%
Colombia 10.9% 10.7% 11.6% 4.2% 3.5% 2.5%
France  10.7% 10.3% 11.5% 1.7% 1.9% 2.5%
UnitedArabEmirates 12.2% 13.3% 13.9% 3.4% 3.6% 2.5%
UnitedKingdom 10.5% 10.3% 11.0% 2.1% 2.7% 2.5%
Egypt  13.0% 13.5% 13.0% 4.0% 4.0% 2.5%
Rangeofdiscountratesinothercountries 11.0%-12.3% 11.1%-13.3% 11.8%-14.0% 2.4%-5.0% 3.4%-4.0% 2.5%
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