Regulatory Alerts2020-05-29 | Resolução CMN 4817Central Bank Resolution CMN No. 4817: Accounting Criteria for Investments in Affiliates, Controlled Entities, and Jointly Controlled Entities
The Central Bank of Brazil issued Resolution CMN No. 4817 to establish accounting criteria for measuring and recognizing investments in affiliates, controlled, and jointly controlled entities by financial institutions. The regulation mandates the use of the equity method for subsequent measurement, defines functional currency determination for foreign subsidiaries, and specifies the initial recognition of goodwill and identifiable assets based on fair value or book value depending on whether transactions occur between independent parties or within the same economic group. It further details procedures for foreign currency translation, impairment testing, and the treatment of contingent liabilities and losses exceeding the investment's carrying amount.