Cemex 2012 Annual Report Download - page 89

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Notes to the
consolidated
financial
statements
89
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Foreign exchange fluctuations occur when the Parent Company or any subsidiary incurs monetary assets or liabilities in a
currency different from its functional currency. These translation gains and losses are recorded in the consolidated statements of
operations, except for exchange fluctuations associated with foreign currency indebtedness directly related to the acquisition of
foreign entities and related parties’ long-term balances denominated in foreign currency, for which the resulting gains or losses are
reported in other comprehensive income. As of December 31, 2012 and 2011, excluding from the sensitivity analysis the impact
of translating the net assets of foreign operations into CEMEX’s reporting currency, considering a hypothetic 10% strengthening
of the U.S. dollar against the Mexican peso, with all other variables held constant, CEMEX’s net loss for 2012 and 2011 would
have increased by approximately US$108 ($1,522) and US$41 ($578), respectively, as a result of higher foreign exchange losses
on CEMEX’s Dollar-denominated net monetary liabilities held in consolidated entities with other functional currencies. Conversely,
a hypothetic 10% weakening of the U.S. dollar against the Mexican peso would have the opposite effect.
As of December 31, 2012 and 2011, CEMEX’s consolidated net monetary assets (liabilities) by currency are as follows:
2012 2011
Monetary assets $ 55,435 62,139
Monetary liabilities (310,102) (352,275)
Net monetary liabilities $ (254,667) (290,136)
Out of which:
Dollars $ (167,157) (169,139)
Pesos (30,989) (26,701)
Other currencies (56,521) (94,296)
$ (254,667) (290,136)
Equity risk
As of December 31, 2012 and 2011, equity risk is the risk that the fair value of future cash flows of a financial instrument
will fluctuate because of changes in the market price of CEMEX’s and/or third party’s shares. As described in note 16D, CEMEX
has entered into equity forward contracts on Axtel CPOs and the TRI index, as well as options and guarantees of a put option
transaction based on the price of CEMEX’s own CPOs. Under these equity derivative instruments, there is a direct relationship in
the change in the fair value of the derivative with the change in value of the underlying share or index. All changes in fair value
of such equity derivative instruments are recognized through the statements of operations as part of “Other financial income
(expense), net.” A significant decrease in the market price of CEMEX’s CPOs and third party shares would negatively affect
CEMEX’s liquidity and financial position.
As of December 31, 2012 and 2011, the potential change in the fair value of CEMEX’s equity forward contracts in Axtel’s shares
that would result from a hypothetical, instantaneous decrease of 10% in the market price of Axtel CPOs, with all other variables
held constant, would have increased CEMEX’s net loss for 2012 and 2011 by approximately US$1 ($17) and US$4 ($53),
respectively, as a result of additional negative changes in fair value associated with such forward contracts. A 10% hypothetical
increase in the CPO price would generate approximately the opposite effect.
As of December 31, 2012 and 2011, the potential change in the fair value of CEMEX’s forward contracts in the TRI index that
would result from a hypothetical, instantaneous decrease of 10% in the aforementioned index, with all other variables held
constant, would have increased CEMEX’s net loss for 2012 and 2011 by approximately US$1 ($6) and US$1 ($14), respectively,
as a result of additional negative changes in fair value associated with such forward contracts. A 10% hypothetical increase in the
TRI index would generate approximately the opposite effect.
As of December 31, 2012 and 2011, the potential change in the fair value of CEMEX’s options (capped call) and the put option
transaction based on the price of CEMEX’s own CPOs that would result from a hypothetical, instantaneous decrease of 10% in
the market price of CEMEX’s CPOs, with all other variables held constant, would have increased CEMEX’s net loss for 2012 and
2011 by approximately US$76 ($971) and US$24 ($332), respectively, as a result of additional negative changes in fair value
associated with these contracts. A 10% hypothetical increase in the CPO price would generate approximately the opposite effect.