Cemex 2012 Annual Report Download - page 51

Notes to the
consolidated
financial
statements
51
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Put options granted for the purchase of non controlling interests and associates
Represent agreements by means of which CEMEX commits to acquire, in case the counterparty exercises its right to sell at a
future date at a predefined price formula, the shares of a non-controlling interest in a subsidiary of CEMEX or an associate. In
respect of a put option granted for the purchase of a non-controlling interest in a CEMEX subsidiary, to the extent the put option
is exercisable at the measurement date, CEMEX recognizes a liability for the net present value of the obligation as of the financial
statements’ date against the controlling interest within stockholders’ equity. In respect of a put option granted for the purchase
of an associate, CEMEX would recognize a liability against a loss in the statements of operations, to the extent the put option
is exercisable at the measurement date, whenever the estimated purchase price exceeds the fair value of the net assets to be
acquired by CEMEX, had the counterparty exercised its right to sell.
Fair value measurements
CEMEX applies the guidance of IFRS 13, Fair value measurements (“IFRS 13”) for its fair value measurements of financial assets
and financial liabilities recognized or disclosed at fair value. IFRS 13 does not require fair value measurements in addition to those
already required or permitted by other IFRSs and is not intended to establish valuation standards or affect valuation practices
outside financial reporting. Under IFRS 13, fair value represents an “Exit Value,” which is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, considering
the counterparty’s credit risk in the valuation.
The concept of exit value is premised on the existence of a market and market participants for the specific asset or liability. When
there is no market and/or market participants willing to make a market, IFRS 13 establishes a fair value hierarchy that prioritizes
the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving
significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that CEMEX has the ability
to access at the measurement date.
• Level 2 inputs are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
• Level 3 inputs are unobservable inputs for the asset or liability.
2M) Provisions
CEMEX recognizes provisions when it has a legal or constructive obligation resulting from past events, whose resolution would
imply cash outflows or the delivery of other resources owned by the Company.
Restructuring (note 17)
CEMEX recognizes provisions for restructuring costs only when the restructuring plans have been properly finalized and
authorized by management, and have been communicated to the third parties involved and/or affected by the restructuring prior
to the balance sheet date. These provisions may include costs not associated with CEMEX’s ongoing activities.
Asset retirement obligations (note 17)
Unavoidable obligations, legal or constructive, to restore operating sites upon retirement of long-lived assets at the end of their
useful lives are measured at the net present value of estimated future cash flows to be incurred in the restoration process, and
are initially recognized against the related assets’ book value. The increase to the assets’ book value is depreciated during its
remaining useful life. The increase in the liability related to the passage of time is charged to the line item of ”Other financial
expenses, net.” Adjustments to the liability for changes in estimations are recognized against fixed assets, and depreciation is
modified prospectively. These obligations are related mainly to future costs of demolition, cleaning and reforestation, so that
quarries, maritime terminals and other production sites are left in acceptable condition at the end of their operation.
Costs related to remediation of the environment (notes 17 and 24)
Provisions associated with environmental damage represent the estimated future cost of remediation, which are recognized at
their nominal value when the time schedule for the disbursement is not clear, or when the economic effect for the passage of
time is not significant; otherwise, such provisions are recognized at their discounted values. Reimbursements from insurance
companies are recognized as assets only when their recovery is practically certain. In that case, such reimbursement assets are
not offset against the provision for remediation costs.