Circular No. 3820 — Establishes Accounting Criteria and Procedures for Consortium Administrators in Extrajudicial Liquidation Regime

The Collegiate Board of the Central Bank of Brazil, in a session held on December 14, 2016, based on Articles 6 and 7, item III, of Law No. 11,795, of October 8, 2008,

R E S O L V E S:

CHAPTER I

ON THE OBJECT AND SCOPE OF APPLICATION

Article 1. This Circular establishes the accounting criteria and procedures that must be observed by consortium administrators in the extrajudicial liquidation regime in their own accounting and that of the respective administered groups.

Sole paragraph. In addition to the criteria and procedures established by this Circular, the administrators mentioned in the caput must apply, when not conflicting with these, the general criteria provided for in the Accounting Plan of the Institutions of the National Financial System (Cosif).

CHAPTER II

ON FINANCIAL STATEMENTS

Article 2. The administrators mentioned in Article 1 must prepare the following financial statements:

I - opening financial statements of the extrajudicial liquidation regime, relating to the date of the decree of the extrajudicial liquidation regime;

II - special balance sheet of the consortium administrator relating to the date corresponding to the substitution of the liquidator, if applicable; and

III - individualized opening financial statements of each consortium group, relating to the date of the decree of the extrajudicial liquidation regime.

Sole paragraph. The administrators mentioned in Article 1 must send to the Central Bank of Brazil, within sixty days after the respective base date, the financial statements mentioned in items I and II.

CHAPTER III

ON ACCOUNTING CRITERIA APPLICABLE TO ADMINISTRATORS AND CONSORTIUM GROUPS

Section I

On Criteria Common to Administrators and Consortium Groups

Article 3. In preparing the opening financial statements and other statements prepared during the maintenance of the extrajudicial liquidation regime, the administrators mentioned in Article 1 must observe the following accounting criteria:

I - assets must be measured by the lower value between:

a) the net book value, considered as the value by which the asset is registered, minus any provisions for losses and their respective accumulated depreciation or amortization; and

b) the net realizable value, considered as the market selling value, minus the estimated value of expenses necessary for the alienation of the asset;

II - due liabilities must be recorded at the updated value of the obligation to be settled, pro rata temporis, up to the date of the opening financial statements, observing the respective contractual conditions;

III - in the financial statements subsequent to the opening financial statements, due liabilities must be updated by the indices provided for in the legislation applicable to the extrajudicial liquidation regime, maintaining detailed control of the updates;

IV - passive provisions, including those related to contingencies, must be constituted and updated, in order to represent the best estimate of the probable future disbursement value, considering the situation of discontinuity of the institution; and

V - in the opening financial statements, income statement accounts must be closed, to the appropriate equity account.

§ 1. Assets registered in fixed assets that continue to be used by the entity during the extrajudicial liquidation regime must be subject to an impairment test starting from the social year following the decree of the regime.

§ 2. In the case of provisions associated with judicial or extrajudicial deposits, the provisioned amount must correspond, at a minimum, to the value of the respective deposits.

§ 3. The provision in § 2 does not apply when there is a liability registered in a specific account for the full value of the deposit related to the obligation constituted.

Article 4. In cases where the accounting of the entity in extrajudicial liquidation does not offer conditions of security and reliability for the adequate verification of its patrimonial, economic, and financial situation, the liquidator must prepare the special opening financial statements of the liquidation based on a general inventory of assets, rights, and obligations.

Article 5. The loss calculated in the opening financial statements of the extrajudicial liquidation will be absorbed by accumulated profits, profit reserves, and capital reserve, in that order.

Section II

On Criteria for Administrators

Article 6. The administrators mentioned in Article 1 must observe, in preparing their special opening financial statements and other statements prepared during the maintenance of the extrajudicial liquidation regime, the following specific criteria:

I - securities and financial instruments must be adjusted to market value, at least during balance sheets and statements, computing the appreciation or depreciation to a specific equity account, by the net value of tax effects;

II - assets registered in permanent assets that are not strictly intended for the administration of the entity in extrajudicial liquidation must be reclassified to specific accounts of non-use assets at the lower value between the net book value and the net realizable value;

III - investments in shareholdings registered in permanent assets must be reclassified to an appropriate account of securities and financial instruments and evaluated according to item I;

IV - the values corresponding to the following equity items, registered in assets, must be written off immediately after the decree of the extrajudicial liquidation regime, with the appropriate equity account as the counterpart:

a) prepaid expenses that are not recoverable;

b) tax credits that cannot be the subject of a request for reimbursement or compensation;

c) goodwill on the acquisition of investments based on expectations of future profitability;

d) deferred asset, except for losses to be amortized from financial leasing; and

e) intangible asset;

V - liabilities must, in the opening balance sheet, be reclassified to accounts representing obligations, according to the bankruptcy classification of the institution's creditors;

VI - values registered in results of future periods must be reclassified to due liabilities;

VII - obligations arising from labor charges must be updated and registered in the appropriate liability rubrics, observing the legal classification of the charges;

VIII - tax obligations or those equivalent to the Public Treasury, registered in active debt, must be updated and registered in the appropriate accounting rubrics at their full value, contained in the respective registration term, until effective payment or final transit of a judicial or administrative decision that modifies it; and

IX - updates of due liabilities must observe the indices provided for in the legislation applicable to the extrajudicial liquidation regime.

Article 7. After the consolidation of the General Creditor Schedule, consortium administrators must observe the following procedures:

I - credits exempt from qualification and those declared as valid must be classified using accounting rubrics exclusively used by companies in the extrajudicial liquidation regime representing the nature and order of preference of the obligation;

II - credits prejudiced by the non-provision of the filed appeal, or by the decision issued in the objection, must, in the case of filing or continuation of actions, as provided in Article 27 of Law No. 6,024, of March 13, 1974, be transferred, by the value of the disputed part, to the appropriate accounting rubric of Fund Reserve, until a final decision, from which they must be reclassified or immediately written off;

III - unqualified credits and those whose qualification is judged invalid, which may be registered, must be immediately written off from the original account, in the case of no objection, appeal, or judicial action against the decision issued; and

IV - new qualifications, carried out after the consolidation of the general creditor schedule, must be regularly registered in the liability, using accounting rubrics exclusively used by institutions in the extrajudicial liquidation regime representing the nature and order of preference of the obligation, to the result of the period or to equity, when they correspond to credits originating before the decree of extrajudicial liquidation.

Article 8. The rubrics intended for the registration of administrative expenses by institutions in the extrajudicial liquidation regime must be used only for the registration of expenses incurred during this regime.

Section III

On Criteria for Consortium Groups

Article 9. In preparing the financial statements of the consortium groups referred to in item III of Article 2, adjustments resulting from any identified asset unsustainability, as well as difficult-to-recover receivables, must be registered as credits to the respective original accounts, to the account representing rights by credit in the qualification process.

Article 10. Any equity deficits calculated in the groups according to Article 9 must be registered in the consortium administrator in the appropriate account representing its obligations with the groups, to the account of accumulated profits or losses;

Sole paragraph. The amount registered in consortium administrators provided for in the caput must correspond to the values registered in the assets of the groups according to Article 9.

Article 11. After the consolidation of the general creditor schedule, the following procedures must be observed:

I - declared values judged valid must be recorded, in the accounting of each group, using accounting rubrics representing the obligation with consortium members in the qualification process, to the group's rights with the administrator; and

II - unqualified credits subject to action as provided in Article 27 of Law No. 6,024, of 1974, must be transferred, by the disputed part, to the appropriate accounting subtitle of fund reserve of the respective accounting title representing obligations with consortium members in the qualification process, to the group's rights with the administrator.

Sole paragraph. The value registered by the groups in the manner of items I and II must be registered, simultaneously, by consortium administrators in the accounting rubrics representing their obligations with the groups, to the account of accumulated profits or losses.

CHAPTER IV

FINAL PROVISIONS

Article 12. The Central Bank of Brazil may determine that the administrators mentioned in Article 1 prepare and send new financial statements as provided for in this Circular, with the necessary corrections, for the adequate expression of the economic and financial reality of the administrator.

Article 13. The administrators mentioned in Article 1 are exempt from publishing the financial statements provided for in Article 13 of Circular No. 2,381, of November 18, 1993.

Article 14. The procedures established by this Circular must be applied:

I - prospectively, from January 1, 2017, for institutions that are already in the extrajudicial liquidation regime on the date of publication of this Circular; and

II - from the date of the decree of the extrajudicial liquidation regime in other situations.

Article 15. This Circular enters into force on the date of its publication.

                            Otávio Ribeiro Damaso Director of Regulation