Cemex 2012 Annual Report Download - page 53

Notes to the
consolidated
financial
statements
53
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Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is not considered probable that the
related tax benefit will be realized. In conducting such assessment, CEMEX analyzes the aggregate amount of self-determined tax
loss carryforwards included in its income tax returns in each country where CEMEX believes, based on available evidence, that the
tax authorities would not reject such tax loss carryforwards; and the likelihood of the recoverability of such tax loss carryforwards
prior to their expiration through an analysis of estimated future taxable income. If CEMEX believes that it is probable that the
tax authorities would reject a self-determined deferred tax asset, it would decrease such asset. Likewise, if CEMEX believes
that it would not be able to use a tax loss carryforward before its expiration or any other deferred tax asset, CEMEX would
not recognize such deferred tax asset. Both situations would result in additional income tax expense for the period in which
such determination is made. In order to determine whether it is probable that deferred tax assets will ultimately be realized,
CEMEX takes into consideration all available positive and negative evidence, including factors such as market conditions, industry
analysis, expansion plans, projected taxable income, carryforward periods, current tax structure, potential changes or adjustments
in tax structure, tax planning strategies, future reversals of existing temporary differences, etc. Likewise, every reporting period,
CEMEX analyzes its actual results versus the Company’s estimates, and adjusts, as necessary, its tax asset valuations. If actual
results vary from CEMEX’s estimates, the deferred tax asset and/or valuations may be affected and necessary adjustments will
be made based on relevant information. Any adjustments recorded will affect CEMEX’s statements of operations in such period.
The income tax effects from an uncertain tax position are recognized when it is more-likely-than-not that the position will be
sustained based on its technical merits and assuming that the tax authorities will examine each position and have full knowledge
of all relevant information, and they are measured using a cumulative probability model. Each position has been considered on
its own, regardless of its relation to any other broader tax settlement. The more-likely-than-not threshold represents a positive
assertion by management that CEMEX is entitled to the economic benefits of a tax position. If a tax position is not considered
more-likely-than-not to be sustained, no benefits of the position are recognized. CEMEX’s policy is to recognize interest and
penalties related to unrecognized tax benefits as part of the income tax in the consolidated statements of operations.
2P) Stockholders’ equity
Common stock and additional paid-in capital (note 20A)
These items represent the value of stockholders’ contributions, and include increases related to the recapitalization of retained
earnings and the recognition of executive compensation programs in CEMEX’s CPOs.
Other equity reserves (note 20B)
This caption groups the cumulative effects of items and transactions that are, temporarily or permanently, recognized directly
to stockholders’ equity, and includes the elements presented in the statements of comprehensive income (loss). Comprehensive
income (loss) for the period includes, in addition to net income (loss), certain changes in stockholders’ equity during a period that
do not result from investments by owners and distributions to owners. The most significant items within “Other equity reserves”
during the reported periods are as follows:
Items of “Other equity reserves” included within other comprehensive income (loss) for the period:
• Currency translation effects from the translation of foreign subsidiaries’ financial statements, net of: a) exchange results
from foreign currency debt directly related to the acquisition of foreign subsidiaries; and b) exchange results from foreign
currency related parties balances that are of a long-term investment nature (note 2D);
• The effective portion of the valuation and liquidation effects from derivative instruments under cash flow hedging
relationships, which are recorded temporarily in stockholders’ equity (note 2L);
• Changes in fair value during the tenure of available-for-sale investments until their disposal (note 2H); and
• Current and deferred income taxes during the period arising from items whose effects are directly recognized in
stockholders’ equity.
Items of “Other equity reserves” not included in comprehensive loss for the period:
• Effects related to controlling stockholders’ equity for changes or transactions affecting non-controlling interest
stockholders in CEMEX’s consolidated subsidiaries;
• Effects attributable to controlling stockholders’ equity for financial instruments issued by consolidated subsidiaries that
qualify for accounting purposes as equity instruments, such as the interest expense paid on perpetual debentures;
• The equity component of outstanding mandatorily convertible securities, which are convertible into shares of the Parent
Company (note 16B). Upon conversion, this amount will be reclassified to common stock and additional paid-in capital; and
• The cancellation of the Parent Company’s shares held by consolidated subsidiaries.