Cemex 2012 Annual Report Download - page 46

Notes to the
consolidated
financial
statements
46
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The most significant closing exchange rates and the approximate average exchange rates for balance sheet accounts and income
statement accounts, respectively, as of December 31 2012, 2011 and 2010, were as follows:
2012 2011 2010
Currency Closing Average Closing Average Closing Average
Dollar 12.8500 13.1500 13.9600 12.4800 12.3600 12.6700
Euro 16.9615 16.9688 18.1017 17.4204 16.4822 16.7106
British Pound Sterling 20.8841 20.9373 21.6939 20.0321 19.2854 19.5404
Colombian Peso 0.0073 0.0073 0.0072 0.0067 0.0065 0.0067
Egyptian Pound 2.0233 2.1590 2.3151 2.0952 2.1285 2.2410
Philippine Peso 0.3130 0.3125 0.3184 0.2886 0.2819 0.2813
The financial statements of foreign subsidiaries are translated from their functional currencies into dollars and subsequently into
pesos. The foreign exchange rates presented in the table above represent the exchange rates inferred from this methodology.
The peso to U.S. dollar exchange rate used by CEMEX is an average of free market rates available to settle its foreign currency
transactions. No significant differences exist, in any case, between the foreign exchange rates used by CEMEX and those published
by the Mexican Central Bank.
2E) Cash and cash equivalents (note 8)
The balance in this caption is comprised of available amounts of cash and cash equivalents, mainly represented by highly-liquid
short-term investments, which are easily convertible into cash, and which are not subject to significant risks of changes in
their values, including overnight investments which yield fixed returns and have maturities of less than three months from the
investment date. These fixed-income investments are recorded at cost plus accrued interest. Other investments which are easily
convertible into cash are recorded at their market value. Gains or losses resulting from changes in market values and accrued
interest are included in the statements of operations as part of other financial income (expense), net.
The amount of cash and cash equivalents in the balance sheet includes restricted cash and cash equivalents, comprised of
deposits in margin accounts that guarantee several of CEMEX’s obligations, to the extent that the restriction will be lifted in less
than three months from the balance sheet date. When the restriction period is greater than three months, such restricted cash and
cash equivalents are not considered cash equivalents and are included within short-term or long-term “Other accounts receivable,”
as appropriate. When contracts contain provisions for net settlement, these restricted amounts of cash and cash equivalents are
offset against the liabilities that CEMEX has with its counterparties.
2F) Trade accounts receivable and other current accounts receivable (notes 9 and 10)
According to IAS 39, Financial instruments: recognition and measurement (“IAS 39”), items under this caption are classified as “loans
and receivables”, which are recorded at their amortized cost, which is represented by the net present value of the consideration
receivable or payable as of the transaction date. Due to their short-term nature, CEMEX initially recognizes these receivables at
the original invoiced amount less an estimate of doubtful accounts. Allowances for doubtful accounts as well as impairment of
other current accounts receivable are recognized against administrative and selling expenses.
Trade receivables sold under securitization programs, in which CEMEX maintains a residual interest in the trade accounts
receivable sold in case of recovery failure, as well as continued involvement in such assets, do not qualify for derecognition and
are maintained on the balance sheet.
2G) Inventories (note 11)
Inventories are valued using the lower of cost and net realizable value. The cost of inventories includes expenditures incurred
in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location
and condition. CEMEX analyzes its inventory balances to determine if, as a result of internal events, such as physical damage,
or external events, such as technological changes or market conditions, certain portions of such balances have become obsolete
or impaired. When an impairment situation arises, the inventory balance is adjusted to its net realizable value, whereas, if an
obsolescence situation occurs, the inventory obsolescence reserve is increased. In both cases, these adjustments are recognized
against the results for the period. Advances to suppliers of inventory are presented as part of other short-term accounts receivable.