CMN Resolution No. 4,872 — General Criteria for the Accounting Recording of Shareholders' Equity of Institutions Authorized by the Central Bank of Brazil

Resolution No. 4,872

RESOLUTION
CMN No. 4,872, OF NOVEMBER 27, 2020

Provides for the general criteria for the accounting recording of the shareholders' equity of institutions authorized to operate by the Central Bank of Brazil.

The Central Bank of Brazil, in accordance with Article 9 of Law No. 4,595, of December 31, 1964, makes public that the Monetary Council, in a session held on November 26, 2020, based on Article 4, items VIII and XII, of the aforementioned Law, and having seen the provisions of Article 61 of Law No. 11,941, of May 27, 2009,

R E S O L V E S:

CHAPTER I
OF THE OBJECT AND SCOPE OF APPLICATION

Art. 1. This Resolution provides for the general criteria for the accounting recording of the shareholders' equity of institutions authorized to operate by the Central Bank of Brazil.

Sole Paragraph. The provisions of this Resolution do not apply to consortium administrators and payment institutions, which must observe the regulations issued by the Central Bank of Brazil in the exercise of their legal powers. (Amended, effective from 3/1/2024, by CMN Resolution No. 5,116, of 1/25/2024.)

Sole Paragraph. The provisions of this Resolution do not apply to consortium administrators, payment institutions, securities brokerage firms, securities distribution firms, and currency brokerage firms, which must observe the regulations issued by the Central Bank of Brazil in the exercise of their legal powers. (Amended, effective from 3/1/2024, by CMN Resolution No. 5,116, of 1/25/2024.)

CHAPTER II
OF THE CRITERIA APPLICABLE TO INSTITUTIONS AUTHORIZED TO OPERATE BY THE CENTRAL BANK OF BRAZIL, EXCEPT CREDIT COOPERATIVES

Section I General Provisions

Art. 2. The shareholders' equity of the institutions mentioned in Art. 1 is divided into:

I - social capital;

II - capital reserves;

III - profit reserves;

IV - other comprehensive income;

V - accumulated profits or losses; and

VI - treasury shares.

Art. 3. The provisions of this Chapter do not apply to credit cooperatives, which must observe the provisions of Chapter III.

Section II Social Capital

Art. 4. The institutions mentioned in Art. 1 must record social capital at the value fixed in their bylaws or articles of incorporation.

Sole Paragraph. The provisions of the main text do not apply to savings and loan associations, which must record in social capital the savings deposits made in cash by saver members.

Art. 5. The institutions mentioned in Art. 1 must record the increase in social capital, deliberated in a shareholders' meeting or partners' meeting, while not approved by the Central Bank of Brazil, in a segregated account in Shareholders' Equity.

Sole Paragraph. The institution cannot record the increase in social capital before the holding of a shareholders' meeting or partners' meeting that approves the matter.

Art. 6. The institutions mentioned in Art. 1 must record, at the net value of transaction costs, the total or partial payment of social capital resulting from the subscription of shares or quotas in a segregated social capital account, in counterpart to the appropriate asset account.

Art. 7. Transaction costs incurred in the issuance of shares, quotas, and subscription bonuses must be recorded separately in the appropriate equity correcting account, at the net value of any tax effects, until the capital increase or the issuance of subscription bonuses is completed.

Sole Paragraph. In situations where the increase in social capital or issuance of subscription bonuses does not occur due to the non-completion of the operation, the transaction costs must be recognized as an expense of the period in which the operation is frustrated.

Art. 8. The institutions mentioned in Art. 1 must record the reduction of social capital, deliberated in a shareholders' meeting or partners' meeting, while not authorized by the Central Bank of Brazil, in a segregated account in Shareholders' Equity.

Section III Reserves

Art. 9. The institutions mentioned in Art. 1 must record in shareholders' equity the following reserves, according to criteria defined in the legislation and current regulations:

I - capital reserves; and

II - profit reserves, segregated into:

a) legal reserve;

b) statutory reserves;

c) contingency reserves;

d) tax incentive reserves;

e) profit retention reserves;

f) profits to be realized reserves; and

g) special profit reserves.

Section IV Other Comprehensive Income

Art. 10. The institutions mentioned in Art. 1 must classify in other comprehensive income, at the net value of any tax effects, the items of revenue and expense not recognized in the period's result according to specific regulation, including asset valuation adjustments.

Section V Accumulated Profits or Losses

Art. 11. The institutions mentioned in Art. 1 must record the net result of the period in the appropriate accumulated profits or losses account, and the balance must:

I - if a credit balance, after approval by the general meeting or partners' meeting and the adjustments prescribed by law and sub-legal regulation, and observing the statutory provisions, be allocated to:

a) the constitution of the legal reserve;

b) the constitution of the other profit reserves;

c) the payment of remuneration of own capital; and

d) the increase in social capital; and

II - if a debit balance at the end of the fiscal year, be absorbed by the following balances, in this order:

a) accumulated profits;

b) profit reserves, except the legal reserve;

c) legal reserve; and

d) capital reserves.

Sole Paragraph. Accumulated losses can only be absorbed by the period's profit, by reserves, when permitted by the applicable legislation and regulation, or by capital reduction previously authorized by the Central Bank of Brazil.

Section VI Treasury Shares

Art. 12. The institutions mentioned in Art. 1 must recognize treasury shares at acquisition cost, as a deduction from the appropriate shareholders' equity account that records the source of the resources applied in their acquisition.

Art. 13. The institutions mentioned in Art. 1 must record the derecognition of alienated treasury shares at their acquisition cost, for the purpose of calculating profit or loss.

Sole Paragraph. Transaction costs incurred in the alienation must be treated as a reduction of profit or an increase in loss, and must be recorded directly in shareholders' equity, not affecting the institution's result.

Section VII Remuneration of Capital

Art. 14. The institutions mentioned in Art. 1 must recognize in liabilities, in counterpart to the appropriate accumulated profits or reserves account, the remuneration of capital that constitutes a present obligation on the date of the interim or annual financial statements.

§ 1. For the purposes of this Resolution, remuneration of capital is considered to be dividends, profit distributions, interest on own capital, and any other similar forms of remuneration of the partners' investment in the institution.

§ 2. Values related to the remuneration of capital paid before a present obligation is constituted must be recognized in counterpart to the appropriate accumulated profits or losses account, at the net value of any tax effects.

Art. 15. The institutions mentioned in Art. 1 must record, separately, as a special profit reserve, in counterpart to the appropriate accumulated profits or losses or reserves account, at the net value of any tax effects:

I - the portion of the proposed remuneration of capital that does not constitute a present obligation on the date of the interim or annual financial statements; and

II - the remuneration of capital that is obligatory on the date of the interim or annual financial statements but not distributed due to:

a) being incompatible with the institution's financial situation; or

b) the existence of legal or regulatory impediments to distribution.

CHAPTER III
OF THE CRITERIA APPLICABLE TO CREDIT COOPERATIVES

Section I General Provisions

Art. 16. The shareholders' equity of credit cooperatives is divided into:

I - social capital;

II - reserves;

III - other comprehensive income; and

IV - accumulated surpluses or losses.

Section II Social Capital

Art. 17. Credit cooperatives must record the total or partial payment of social capital, through the subscription of share quotas, in the appropriate social capital account in counterpart to the appropriate asset account.

§ 1. In the case where the member's participation in the cooperative's social capital is not fully paid at the time of subscription of share quotas, the institution must record the remaining amount to be paid in the appropriate shareholders' equity account.

§ 2. The value of the unpaid social capital participation according to § 1 must be reclassified to the appropriate capital account at the time of payment.

Art. 18. Credit cooperatives must record the increase in social capital in the appropriate shareholders' equity account.

Art. 19. Credit cooperatives must record the reduction of social capital in the appropriate shareholders' equity account, with the appropriate liability account as counterpart, when the share quota becomes due, as defined in current legislation and the cooperative's bylaws.

Section III Reserves

Art. 20. Credit cooperatives must record in the appropriate reserve accounts, observing the general assembly's deliberations and their respective purposes, the reserves constituted by the appropriation of the period's surpluses.

§ 1. The reserve fund, constituted in accordance with current legislation, must be recorded as a legal reserve.

§ 2. Reserves constituted based on a general assembly decision, when legally permitted, must have their purpose and methods of formation, application, and settlement duly defined and controlled by the institution.

Section IV Remuneration of Share Quotas of Capital

Art. 21. Credit cooperatives must record the remuneration of share quotas of capital declared to their members, according to current legislation, as an expense in counterpart to the appropriate account of:

I - social capital, if distributed in the form of capital share quotas;

II - special reserves, if not distributed because such distribution is incompatible with the cooperative's financial situation; or

III - liabilities, in other cases.

Section V Other Comprehensive Income

Art. 22. Credit cooperatives must classify in other comprehensive income, at the net value of any tax effects, the items of revenue and expense, not recognized in the period's result according to specific regulation, including asset valuation adjustments.

Section VI Accumulated Surpluses or Losses

Art. 23. Credit cooperatives must record the net surpluses or losses of the period in the appropriate shareholders' equity item, and the balance at the end of the fiscal year, according to the general assembly's deliberation and observing current legislation:

I - if a credit balance, be allocated to:

a) the constitution of the reserve fund;

b) the constitution of the Technical, Educational and Social Assistance Fund (Fates);

c) the compensation of losses from previous years;

d) the constitution of reserves;

e) the constitution of other funds; and

f) the distribution among members; or

II - if a debit balance, must be:

a) maintained in the accumulated surpluses or losses account;

b) absorbed with the use of resources from the existing balance of the reserve fund and other reserves constituted for this purpose; and

c) distributed among members, only when the resources from the reserves mentioned in the previous letter are insufficient.

Art. 24. Credit cooperatives must record the values destined to Fates and voluntary funds that represent obligations and are destined for specific purposes, constituted with the net surpluses calculated at the end of the fiscal year, in the appropriate liability accounts, in counterpart to the accumulated surpluses or losses account.

CHAPTER IV
FINAL PROVISIONS

Art. 25. The Central Bank of Brazil is authorized to issue norms and adopt measures necessary for the execution of the provisions of this Resolution, including the requirements for disclosure of information in explanatory notes.

Art. 26. The accounting procedures established in this Resolution must be applied prospectively from the date of its entry into force.

§ 1. Values related to any adjustments resulting from the application of the provisions of this Resolution must be recorded in the accumulated profits or losses account.

§ 2. The institutions mentioned in Art. 1 that on the date mentioned in the main text maintain balances of reserves not provided for in this Resolution may:

I - maintain the balance of these reserves until:

a) the date of their effective realization through depreciation and derecognition, including by alienation of the revalued asset, in the case of revaluation reserves; or

b) the fulfillment of the purpose for which they were constituted, in the case of other reserves; or

II - derecognize the existing balance in counterpart to the accumulated profits or losses account.

Art. 27. The following are repealed:

I - Resolution No. 3,565, of May 29, 2008;

II - Resolution No. 3,605, of August 29, 2008;

III - Resolution No. 4,003, of August 25, 2011;

IV - Resolution No. 4,706, of December 19, 2018; and

V - Circular No. 2,750, of April 9, 1997.

Art. 28. This Resolution enters into force on January 1, 2022.

Roberto de Oliveira Campos Neto
President of the Central Bank of Brazil