Circular No. 3959 — Provides for the procedures for the preparation and disclosure of financial statements by financial institutions and other institutions authorized to operate by the Central Bank of Brazil

The Collegiate Board of the Central Bank of Brazil, in a session held on 4 September 2019, based on arts. 9º of Law No. 4,595, of 31 December 1964; arts. 6 and 7, item III, of Law No. 11,795, of 8 October 2008; art. 9, item IX, sub‑item "b", and art. 15 of Law No. 12,865, of 9 October 2013; and art. 12 of Resolution No. 4,720, of 30 May 2019,

RESOLVES:

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CHAPTER I

OF THE OBJECT AND SCOPE OF APPLICATION

Art. 1 This Circular establishes the procedures for the preparation and disclosure of financial statements by financial institutions and other institutions authorized to operate by the Central Bank of Brazil.

Single paragraph. The provisions of this Circular do not apply to associations and to non‑profit civil entities authorized to administer a consortium.

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CHAPTER II

OF THE CONTENT AND FORM OF THE FINANCIAL STATEMENTS

Section I

Of the Balance Sheet

Art. 2 The institutions mentioned in Art. 1 must present, in the Balance Sheet, the balances of all accounting groupings relevant to the understanding of their patrimonial situation.

Paragraph 1. The Balance Sheet must contain, at a minimum, information on the following patrimonial items:

• I – Assets:
  • a) cash and cash equivalents;
  • b) financial instruments;
  • c) finance lease operations;
  • d) provisions for expected losses associated with credit risk;
  • e) tax credits;
  • f) investments in participations in affiliates and subsidiaries;
  • g) property, plant and equipment for use;
  • h) intangible assets;
  • i) depreciations and amortizations; and
  • j) provisions for reduction to recoverable amount of assets;
• II – Liabilities:
  • a) deposits and other financial instruments;
  • b) provisions;
  • c) deferred tax obligations;
  • d) share capital;
  • e) capital reserves;
  • f) profit reserves;
  • g) other comprehensive income;
  • h) accumulated profits or losses; and
  • i) treasury shares.

Paragraph 2. The balances of the most relevant classes of the patrimonial items listed in sub‑items "b", "d", "i" and "j" of item I and in sub‑item "a" of item II of paragraph 1 must be presented in a segregated manner in the Balance Sheet or in explanatory notes.

Paragraph 3. Finance lease operations must be presented with the following balances:

• I – present value of the total amounts to be received under the contract; and
• II – provision for expected losses associated with credit risk.

Paragraph 4. In calculating the present value referred to in paragraph 3, item I, the rate equivalent to the financial charges provided for in the contract must be used, or, if there is no contractual provision, the rate that equalises the value of the leased asset on the contract date with the present value of all receipts and payments foreseen over the contractual term, including:

• I – the guaranteed residual value; or
• II – the probable present value of the asset’s realisation at the end of the contract, deducting selling costs, in the absence of a guaranteed residual value.

Art. 3 Assets must be presented in the Balance Sheet segregated into:

• I – Current, composed of:
  • a) resources considered cash or cash equivalents, according to specific regulation, except when their use is prohibited for at least twelve months after the balance date;
  • b) assets realizable up to twelve months after the balance date;
  • c) instruments held within a business model that foresees the trading of the asset, regardless of its maturity, within twelve months counted from the balance date; or
  • d) applications of resources for the pre‑payment of expense arising from an obligation to be fulfilled by third parties in the twelve months following the balance date;
• II – Non‑current, composed of assets not classified as current, subdivided into:
  • a) long‑term realizable;
  • b) investments;
  • c) property, plant and equipment; and
  • d) intangible assets.

Paragraph 1. Asset accounts must be presented in descending order of liquidity.

Paragraph 2. The class of assets referred to in sub‑item "a" of item II of the caput is constituted by:

• I – rights realizable after the end of the twelve months succeeding the balance;
• II – assets held within a business model that foresees their trading, regardless of maturity, after the end of the twelve months succeeding the balance;
• III – applications of resources for the pre‑payment of expense arising from an obligation to be fulfilled after the end of the twelve months succeeding the balance;
• IV – operations carried out with affiliated or controlled companies, directors, shareholders, or participants in the institution’s profit that do not constitute usual business in the exploration of the corporate purpose; and
• V – tax credits.

Art. 4 Liabilities must be presented in the Balance Sheet segregated into:

• I – Current, composed of obligations:
  • a) whose settlement is expected to occur within twelve months after the balance date, even if the settlement period exceeds twelve months; or
  • b) that are maintained within a business model that foresees the trading of the liability, regardless of its maturity, within twelve months counted from the balance date;
• II – Non‑current, composed of obligations:
  • a) whose settlement is expected to occur after the twelve months following the balance date;
  • b) whose settlement the institution has an unconditional and unilateral right to defer for at least twelve months after the balance date;
  • c) whose creditor has made a firm commitment, up to the balance date, to extend its maturity to at least twelve months after the balance date, without the possibility of early settlement demand; or
  • d) deferred tax obligations; and
• III – Equity.

Paragraph 1. Liability accounts must be presented in descending order of liquidity.

Paragraph 2. The following information about share capital and reserves must be disclosed in the Balance Sheet, the Statement of Changes in Equity, or explanatory notes:

• I – the number of authorized, subscribed and paid‑in shares and subscribed but not paid‑in shares;
• II – the nominal value per share, also indicating when there is no value;
• III – the reconciliation between the numbers of shares outstanding at the beginning and at the end of the period;
• IV – the rights, preferences and restrictions associated with each class of shares, including restrictions on dividend distribution and capital redemption;
• V – the institution’s own shares or quotas held by itself, by subsidiaries or by affiliates;
• VI – the shares intended for issuance to honour options and share‑sale contracts, including the periods and respective values; and
• VII – a description of the nature and purpose of each reserve.

Paragraph 3. An institution not constituted as a corporation must disclose information equivalent to that required in paragraph 2, evidencing the changes during the period in each category of equity participation and the rights, preferences and restrictions associated with each category of patrimonial instrument.

Art. 5 Presentation of asset and liability accounts in the Balance Sheet based solely on liquidity and exigibility is permitted if the institution judges that such presentation will provide more relevant and reliable information to the user.

Single paragraph. When the prerogative described in the caput is used, the expected amount to be realised or settled within twelve months and beyond must be evidenced in the Balance Sheet or in explanatory notes for each item presented in assets and liabilities.

Section II

Of the Income Statement

Art. 6 The institutions mentioned in Art. 1 must present, in the Income Statement, the balances relating to all accounting groupings relevant to the understanding of their performance during the period, specifying at a minimum information on the following items:

• I – main financial intermediation revenues and expenses;
• II – financial intermediation result;
• III – other operating revenues;
• IV – main operating expenses;
• V – provision expenses, segregated by the most relevant classes;
• VI – operating result;
• VII – main items of other revenues and expenses;
• VIII – result before taxes and participations;
• IX – taxes and participations on profit;
• X – net result; and
• XI – net result per share.

Art. 7 In disclosing the net result per share referred to in item XI of the caput of Art. 6, financial institutions and other institutions authorised to operate by the Central Bank of Brazil that are incorporated as a publicly‑held company or as a conglomerate leader classified in Segment 1 (S1), Segment 2 (S2) or Segment S3 (S3) must observe CPC Pronouncement 41 – Earnings per Share, approved on 8 July 2010 by the Accounting Pronouncements Committee (CPC), including the evidencing of information in explanatory notes.

Paragraph 1. For the purposes of the caput, Appendix A2 of CPC 41 must not be considered.

Paragraph 2. References in CPC 41 to the recognition of preferred shares as liability and to other accounting criteria or procedures not provided for in norms of the National Monetary Council or the Central Bank of Brazil do not authorise institutions to apply those criteria or procedures.

Paragraph 3. The technical pronouncements cited in CPC 41, while not received by specific act of the National Monetary Council or the Central Bank of Brazil, cannot be applied.

Paragraph 4. References to other CPC pronouncements in CPC 41 must be interpreted, for the effects of the caput, as references to CPC pronouncements received by the National Monetary Council or the Central Bank of Brazil, as well as to provisions of the Accounting Plan for Institutions of the National Financial System (Cosif) that establish accounting criteria correlated to the pronouncements mentioned.

Section III

Of the Comprehensive Income Statement

Art. 8 The institutions mentioned in Art. 1 must present, in the Comprehensive Income Statement, the following information:

• I – net result of the period; and
• II – other comprehensive income of the period, segregated into:
  • a) items that will be reclassified to result; and
  • b) items that will not be reclassified to result.

Paragraph 1. For the purposes of this Circular, other comprehensive income is considered to be the items of revenue and expense recognised directly in equity, in accordance with the regulations in force.

Paragraph 2. The portions of other comprehensive income attributable to the institution itself must be segregated from the portions relating to participation in other comprehensive income of investments evaluated by the equity method.

Paragraph 3. The amount of the tax effect related to each component of the statement must be disclosed in the Comprehensive Income Statement or in explanatory notes.

Section IV

Of the Statement of Changes in Equity

Art. 9 The institutions mentioned in Art. 1 must present in the Statement of Changes in Equity the alterations that occurred in equity accounts during the period, evidencing at a minimum:

• I – the comprehensive result of the period, segregating the total amount attributable to the owners of the controlling institution and the participation of non‑controlling interests, in the case of consolidated financial statements;
• II – the effects of any retrospective applications of accounting policies or retrospective restatements of patrimonial items, recognised in accordance with the regulations in force, for each component of equity;
• III – the reconciliation of the opening and closing balances for each component of equity, showing separately the modifications arising from:
  • a) net profit;
  • b) each item of other comprehensive income; and
  • c) transactions with owners, segregating capital contributions and distributions made; and
• IV – the amount of capital remuneration recognised as distribution to owners during the period, segregating the amounts relating to dividends and interest on equity.

Section V

Of the Consolidated Consortium Resources Statement

Art. 10 Consortium administrators must present, in the Consolidated Consortium Resources Statement, the following information:

• I – Assets:
  • a) cash and cash equivalents;
  • b) financial applications;
  • c) advances of third‑party resources;
  • d) receivables;
  • e) book value of reclaimed or returned assets;
  • f) rights to credit in qualification processes; and
  • g) rights with consortium members;
• II – Active compensation:
  • a) monthly forecast of resources to be received from consortium members;
  • b) contributions due to the group;
  • c) value of goods or services to be contemplated; and
  • d) other amounts that do not have a specific account;
• III – Liabilities:
  • a) obligations with consortium members;
  • b) amounts to be transferred;
  • c) obligations for contemplated deliveries;
  • d) obligations with the administrator;
  • e) resources to be returned to consortium members; and
  • f) group resources;
• IV – Passive compensation:
  • a) monthly resources to be received from consortium members;
  • b) group obligations for contributions;
  • c) goods or services to be contemplated; and
  • d) other amounts that do not have a specific account.

Single paragraph. Accounting titles referring to the account must be presented whenever their omission could compromise the understanding of the statements.

Section VI

Of the Consolidated Group Cash Flow Variations Statement

Art. 11 Consortium administrators must evidence in the Consolidated Group Cash Flow Variations Statement the variations that occurred during the period, specifying at a minimum information on the following items:

• I – cash and cash equivalents;
• II – financial applications of the groups;
• III – financial applications linked to contemplated deliveries;
• IV – collected resources; and
• V – resources used.

Single paragraph. The institution must present:

• I – for items I, II and III of the caput, the reconciliation of the opening and closing balances of the period; and
• II – for the resources referred to in items IV and V of the caput, the accounting titles considering the nature of the resource.

Section VII

General Provisions

Art. 12 The institutions mentioned in Art. 1 must present, in a highlighted manner, the following information in each financial statement and in the explanatory notes:

• I – the institution’s name, as well as any change that may have occurred in this identification since the end of the previous period;
• II – the scope of the financial statements, indicating whether they refer to the individual institution or to the consolidated group of institutions;
• III – the closing date of the period or the period to which the financial statements and the respective explanatory notes refer; and
• IV – the rounding level of monetary values used in the presentation of the financial statements.

Single paragraph. The rounding referred to in item IV of the caput must not cause distortion of the information provided.

Art. 13 The nomenclature of the accounts used and their order of presentation or aggregation in the financial statements may be modified according to the nature of the institution’s activities, provided that the new account structure supplies more relevant information for the understanding of its patrimonial and financial situation, its performance and its cash flows.

Art. 14 The institutions mentioned in Art. 1 must present in the financial statements the balances of accounting groupings additional to those established in this Chapter whenever they are relevant for the understanding of their patrimonial and financial situation, performance and cash flows.

Single paragraph. The presentation in the Balance Sheet of additional accounts as provided in the caput must consider:

• I – the nature and liquidity of the assets;
• II – the function of the assets; and
• III – the amounts, nature and terms of the liabilities.

Art. 15 Non‑presentation in a highlighted manner of the balances of accounting groupings established in this Chapter is permitted when those balances are immaterial.

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CHAPTER III

OF THE EXPLANATORY NOTES

Art. 16 The institutions mentioned in Art. 1 must disclose, in the presentation of explanatory notes to the financial statements:

• I – all information necessary for a complete understanding of their patrimonial position and evolution, financial situation, performance and cash flows;
• II – information on the preparation basis of the financial statements and the specific accounting policies applied to significant transactions and events;
• III – information not inserted in the financial statements themselves but considered necessary for an adequate presentation of their patrimonial and financial situation, performance and cash flows, including information additional to that required by the regulations in force;
• IV – judgments made in the application of accounting policies that cause significant effects on the values recognised in the financial statements, except those arising from estimates;
• V – recurring and non‑recurring results in a segregated manner; and
• VI – the following information:
  • a) its domicile and legal form, the address of its headquarters and the main place of business, if different from the headquarters;
  • b) a description of the nature of its operations and its main activities; and
  • c) the name of the ultimate controller and of the controller of the economic group to which it belongs.

Paragraph 1. Accounting policies must be presented in a way that provides adequate understanding of the effects of transactions and other events on the patrimonial and financial situation, performance and cash flows.

Paragraph 2. Cross‑references of each item of the financial statements with the respective information presented in the explanatory notes must be provided, except in cases of disclosure of additional information not related to a specific item of the statements.

Paragraph 3. Explanatory notes must be presented systematically, considering the effects on the understandability and comparability of the financial statements.

Art. 17 Explanatory notes must contain specific information on:

• I – uncertainties in the estimates of assets and liabilities whose accounting values may undergo significant changes in the next fiscal year, including:
  • a) the nature and accounting value of assets and liabilities at the end of the reporting period;
  • b) the nature of the assumptions and other uncertainties in the estimates;
  • c) the sensitivity of the accounting values to the methods, assumptions and estimates underlying the respective calculation, including the reasons for such sensitivity;
  • d) the range of reasonably possible scenarios over the next fiscal year concerning the accounting values of the impacted assets and liabilities; and
  • e) an explanation of changes made to the assumptions adopted in the past regarding these assets and liabilities, should the uncertainty remain unresolved;
• II – capital management, comprising:
  • a) qualitative information about its objectives, policies and processes, including:
    1. a description of the elements encompassed by capital management;
    2. the nature of the capital requirements imposed by the regulations in force and how they are integrated into capital management; and
    3. how the objectives of capital management are being met;
  • b) relevant quantitative data on the elements included in capital management;
  • c) any changes in the information covered by sub‑items "a" and "b" compared with the previous period; and
  • d) indication of compliance or non‑compliance, during the period, with the capital requirements set out in the regulations in force, as well as the consequences of non‑compliance;
• III – the capital remuneration declared or proposed, which does not constitute a present obligation, together with the respective value per share or equivalent; and
• IV – the instruments eligible as capital, including:
  • a) the objectives, policies and processes for managing the repurchase or redemption obligation of the instruments when required by the holders of those instruments, including any changes relative to the previous period; and
  • b) the expected cash flows in the repurchase or redemption of that class of financial instruments.

Paragraph 1. The information referred to in item II of the caput must be based on information provided internally to the institution’s senior management.

Paragraph 2. The institution must disclose information on capital requirements in an aggregated or individual manner per requirement, using the form that best reflects the correct understanding of capital management.

Art. 18 Consortium administrators must also present information relating to the administrator and the ongoing consortium groups, specifying at a minimum the following items:

• I – number of groups administered;
• II – goods delivered, in the current period and in total;
• III – delinquency rate;
• IV – number of active and excluded consortium members, in the current period and in total; and
• V – number of goods pending delivery.

Art. 19 Institutions mentioned in Art. 1 that do not prepare their financial statements under the going‑concern assumption must disclose:

• I – the bases on which the financial statements were prepared; and
• II – the reason why the going‑concern assumption is not presumed for the institution.

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CHAPTER IV

OF INTERIM FINANCIAL STATEMENTS

Section I

Of the Presentation and Preparation of Interim Financial Statements

Art. 20 Institutions mentioned in Art. 1 that prepare and disclose interim financial statements must present:

• I – the Income Statement and the Comprehensive Income Statement for the current interim period and the accumulated balance of the current fiscal year; and
• II – the other statements based on the balance of the current fiscal year.

Section II

Of Condensed Statements

Art. 21 Institutions mentioned in Art. 1 that, based on the regulations in force, prepare and disclose interim financial statements in a condensed form must include all relevant information for the understanding of changes in their patrimonial and financial situation, performance and cash flows that occurred since the end of the most recent fiscal year, including, at a minimum, the balance of each group and subgroup of accounts that were included in the most recent complete financial statements.

Paragraph 1. In defining the information to be included in condensed statements, the materiality of the interim‑period information must be evaluated.

Paragraph 2. Additional item balances beyond those provided in the caput must be included in condensed statements if they are relevant for the understanding of the items mentioned therein.

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Art. 22. The items presented in the condensed financial statements must be classified, recognized and measured, in accordance with the current regulations, up to the base date of those statements, according to the same accounting criteria applicable to the semi‑annual and annual statements.

Sole paragraph. Retrospective adjustment of the values disclosed in the intermediate statements of previous periods is prohibited due to changes in estimates in the current period.

Section III

Selected Explanatory Notes

Art. 23. The institutions mentioned in art. 1 who prepare and disclose selected explanatory notes must highlight the significant information for understanding the equity, economic and financial changes and their performance since the end of the last fiscal year, as provided in Chapter III.

§ 1 The content of the selected explanatory notes must include, at minimum:

I - a description of the nature and effects of any changes in accounting policies and calculation methods used in preparing the statements or, if there are no changes, a statement that those policies and methods are the same as those used in the most recent annual financial statements;

II - the explanations necessary to understand seasonal or cyclical intermediate operations, if any;

III - the nature and amounts of unusual items because of their nature, size or incidence that affected assets, liabilities, equity, net income or cash flows;

IV - the nature and amounts of changes in the estimates of values disclosed in a previous intermediate period of the current year, in the final intermediate period of the current fiscal year or in previous annual periods;

V - issuances, repurchases and redemptions of debt securities and equity securities;

VI - the remuneration of capital paid separately for common shares and for other types and classes of shares;

VII - subsequent events after the end of the intermediate period that have not been reflected in the intermediate period's accounting statements;

VIII - the effects of changes in its structure during the intermediate period, including incorporation, merger, spin‑off, acquisition or loss of control of subsidiaries and long‑term investments, restructurings and discontinued operations; and

IX - the information defined in the current regulations on the fair value of financial instruments.

§ 2 In the selected explanatory notes, it is optional to present information that has not undergone a significant change compared with that disclosed in the explanatory notes of the most recent annual financial statements.

CHAPTER V

OF THE FORM OF DISCLOSURE OF FINANCIAL STATEMENTS

Art. 24. The institutions mentioned in art. 1 must disclose their financial statements in a comparative manner with the previous period, observing that:

I - the Balance Sheet at the end of the current period must be compared with the Balance Sheet at the end of the immediately preceding fiscal year; and

II - the other statements must be compared with the same periods of the preceding fiscal year for which they were presented.

§ 1 The explanatory notes necessary for proper understanding must be presented comparably, when relevant for the comprehension of the set of statements for the period.

§ 2 In addition to what is required in the caput, the Balance Sheet corresponding to the beginning of the previous period must be disclosed when the following changes cause a material effect on the information of that balance sheet:

I - retrospective application of an accounting policy;

II - retrospective re‑presentation of items of the financial statements; or

III - reclassification of items of the financial statements.

§ 3 For business lines that are relevantly seasonal, all information necessary to understand the effects of seasonality on the institution's financial position, performance and cash flows must be disclosed.

§ 4 Comparative presentation is optional:

I - of the financial statements, semi‑annual and annual, relating to the year of authorization for the institution to operate by the Central Bank of Brazil; and

II - of the Comprehensive Income Statement, in the financial statements relating to the fiscal year 2020.

Art. 25. The institutions mentioned in art. 1 must reclassify the values presented for comparative purposes when the presentation or classification of items in the financial statements is altered, and must disclose in the explanatory notes:

I - the nature of the reclassification;

II - the amount of each item or class of items that was reclassified; and

III - the reason for the reclassification.

Sole paragraph. In situations where the reclassification referred to in the caput is impracticable, must be disclosed:

I - the reason for not reclassifying the values; and

II - the nature of the adjustments that would have been made if the values had been reclassified.

Art. 26. The institutions mentioned in art. 1 must disclose the financial statements within the following deadlines:

I - up to 45 days from the base date, for intermediate statements;

II - up to 60 days from the base date, for semi‑annual statements; and

III - up to 90 days from the base date, for annual statements.

Art. 27. The financial statements referred to in art. 2 of Resolution No. 4,720, of 30 May 2019, and arts. 2 and 3 of Circular No. 3,950, of 25 June 2019, must also be disclosed in open‑data format, according to specifications established in the current regulations.

CHAPTER VI

FINAL PROVISIONS

Art. 28. The following documents are excluded from the Accounting Plan of Financial System Institutions (Cosif):

I - Document No. 2 – Trial Balance/Balance Sheet;

II - Document No. 3 – Consortium Resources Statement;

III - Document No. 8 – Income Statement;

IV - Document No. 9 – Statement of Equity Evolution;

V - Document No. 10 – Statement of Composition and Diversification of Applications; and

VI - Document No. 11 – Statement of Changes in Equity.

Art. 29. The institutions mentioned in art. 1 must apply the provisions of this Circular prospectively from its entry into force date.

Art. 30. The items II and III of art. 4 and art. 5 of Circular No. 3,903, of 6 June 2018, are revoked.

Art. 31. This Circular enters into force on 1 January 2020.

Otávio Ribeiro Damaso
Director of Regulation
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