CMN Resolution No. 4534 — Criteria for Accounting Recognition and Measurement of Intangible Asset Components and Deferred Asset

The Central Bank of Brazil, in accordance with Article 9 of Law No. 4,595 of December 31, 1964, makes public that the National Monetary Council, in a session held on November 24, 2016, based on Article 4, items VIII and XII, of the aforementioned Law,

R E S O L V E D:

Art. 1 Financial institutions and other institutions authorized to operate by the Central Bank of Brazil must register in the intangible asset account identifiable non-monetary assets without physical substance, acquired or developed by the institution, intended for the maintenance of the institution or exercised with that purpose.

§ 1 The provisions of this Resolution do not apply to consortium administrators and payment institutions, which must observe the regulation issued by the Central Bank of Brazil, in the exercise of their legal attributes.

§ 2 For the purposes of this Resolution, consider:

I - non-monetary asset, the asset that is not represented by currency units kept in cash and that cannot be received in a fixed or determinable number of currency units;

II - identifiable asset:

a) the asset that can be separated from the institution and sold, transferred, licensed, rented, or exchanged, individually or together with a related contract, asset, or liability, regardless of the institution's intention to use it; or

b) the asset that results from contractual rights or other legal rights, regardless of whether such rights are transferable or separable from the institution or from other rights and obligations; and

III - developed asset, the asset that results from the application of the results of research or other knowledge in a plan or project aimed at the production of new or substantially improved materials, devices, products, processes, systems, or services, before the start of their commercial production or use.

Art. 2 The recognition of intangible assets developed by the institutions referred to in Art. 1 is conditioned on the simultaneous existence of the following characteristics:

I - technical feasibility to complete the asset so that it is made available for use;

II - intention to complete the asset and to use it;

III - ability to use the asset;

IV - existence of a market for the products generated by the asset;

V - usefulness of the asset;

VI - availability of technical, financial, and other adequate resources to complete the development of the asset and to use it; and

VII - ability to reliably measure the expenditures attributable to the asset during its development.

§ 1 The recognition referred to in the main text must be based on supporting documentation demonstrating compliance with the conditioning characteristics set forth in items I to VII.

§ 2 The supporting documentation referred to in § 1 must be kept available to the Central Bank of Brazil for at least five years, counted from the initial registration of the corresponding asset.

§ 3 The recognition of intangible assets developed by the institution itself relating to brands, publication titles, and customer lists is prohibited.

Art. 3 Intangible assets must be recognized at cost value, which comprises:

I - the acquisition price or the cash development cost, plus any import taxes and non-recoverable taxes; and

II - other directly attributable costs necessary to prepare the asset for the proposed purpose.

Sole Paragraph. In the acquisition of intangible assets on credit, the difference between the cash price and the total payments must be appropriated monthly, pro rata temporis, in the appropriate expense account, according to the accrual basis.

Art. 4 Intangible assets received as donations, meeting legal and regulatory requirements, must be recorded at their market value, as a counterpart to the period's result:

I - in the intangible asset, if they are intended for the maintenance of the institution's activities or have this purpose for a period longer than one fiscal year; or

II - in current assets, in other cases.

Sole Paragraph. The estimated value of any obligation assumed by the institution in the donation operation of the asset must be recognized in the liability as a counterpart to the period's result.

Art. 5 Subsequent expenditures after the recognition of intangible assets that effectively increase their useful economic life, efficiency, productivity, or capacity to generate future economic benefits may be added to the book value of the asset.

Sole Paragraph. The recognition in the asset of any subsequent expenditure after the recognition of intangible assets relating to brands, publication titles, logos, customer lists, and items of a similar nature, acquired or developed by the institution, is prohibited.

Art. 6 The amortization of the intangible asset with a defined useful life must be recognized monthly over the estimated useful life of the asset, as a counterpart to the specific operational expense account.

§ 1 For the purposes of this Resolution, consider:

I - amortization, the systematic allocation of the depreciable amount of an intangible asset over its useful life;

II - useful life, the period of time during which the institution expects to use the asset, observing the following factors:

a) the expected use of an asset by the institution;

b) the typical life cycles of the asset's products and public information on useful life estimates of similar assets, used in a similar manner;

c) technical, technological, commercial, or other types of obsolescence;

d) the stability of the sector in which the asset operates and changes in market demand for products or services generated by the asset;

e) expected measures by competitors or potential competitors;

f) the level of maintenance expenditures required to obtain the future economic benefits of the asset and the institution's ability and intention to achieve such level;

g) the period of control over the asset and legal or similar limits for its use, such as expiration dates of related leases and rentals;

h) the useful life of other assets of the institution, if the useful life of the asset depends on joint use with other assets; and

i) legal and economic factors;

III - depreciable amount, the difference between the acquisition cost determined in accordance with Art. 3 and the residual value; and

IV - residual value, the estimated value that the institution would obtain from the sale of the asset, after deducting estimated selling expenses, if the asset already had the expected conditions for the end of its useful life.

§ 2 The amortization of the intangible asset with a defined useful life must correspond to the depreciable amount divided by the useful life of the asset, calculated linearly, from the moment the asset is available for use, in the location and conditions necessary for it to be used in the manner intended by the institution's management.

§ 3 The residual value of the intangible asset must be zero, except if there is:

I - a commitment from third parties to purchase the asset at the end of its useful life; or

II - a liquid market for the asset that meets the following conditions:

a) it is possible to determine the residual value in relation to this market; and

b) it is probable that the market will continue to exist at the end of the asset's useful life.

§ 4 The useful life and residual value of the intangible asset must be reviewed at least at the end of each fiscal year.

Art. 7 The useful life of the intangible asset resulting from contractual rights or legal rights must not exceed the validity period of these rights, and may be shorter depending on the period during which the institution expects to use the asset.

§ 1 If the rights mentioned in the main text are granted for a limited renewable period, the useful life of the intangible asset should only include the renewal period if the institution assesses that there is a high probability of renewal, observing, at a minimum, the following factors:

I - evidence, based on experience, that the contractual rights or other legal rights will be renewed and that any conditions necessary to obtain the renewal will be met;

II - evidence that, if third-party authorization is required to renew the contractual rights, such authorization will be granted; and

III - insignificant cost of renewing the contractual rights, in relation to the future economic benefits expected by the institution from the renewal.

§ 2 If the cost of renewing the rights for the institution is significant, when compared to the future economic benefits expected, the cost of the renewal must essentially represent the cost of acquiring a new intangible asset on the date of renewal.

Art. 8 Amortization must cease on the date the asset is derecognized or on the date the institution decides to discontinue the use of the asset in its activities, whichever occurs first.

Art. 9 Intangible assets characterized as having an indefinite useful life are not amortizable.

§ 1 For the purposes of this article, an intangible asset is characterized as having an indefinite useful life when there is no foreseeable time limit during which the asset is expected to generate net positive cash flows for the institution.

§ 2 The verification and characterization of the intangible asset as having an indefinite useful life must be done taking into account all relevant factors available.

§ 3 The existence of difficulties in determining the useful life of an intangible asset is not a sufficient condition to characterize this asset as having an indefinite useful life.

§ 4 The institution must verify, at a minimum, at the end of each fiscal year whether the condition referred to in § 1 remains in existence.

§ 5 Any change in assessment regarding the characterization of the intangible asset as having an indefinite useful life must be recognized as a change in accounting estimate, in accordance with the regulations in force.

Art. 10 The intangible asset must be derecognized when:

I - it is disposed of; or

II - future economic benefits are not expected from its use or disposal.

§ 1 Gains or losses resulting from the derecognition of the intangible asset, determined by the difference between the net disposal value, if any, and the book value of the asset, must be recognized in the result when the asset is disposed of.

§ 2 In the sale of intangible assets on credit, the difference between the cash price and the total expected receipts must be appropriated monthly in the appropriate revenue account, according to the accrual basis.

Art. 11 If the institution's management decides to discontinue the use in its activities of an intangible asset, the asset must be derecognized, or, if it can be sold, transferred to the appropriate current asset account at the lower of the book value and the market value minus the costs necessary for the sale.

Art. 12 It is prohibited for the institutions mentioned in Art. 1 to register deferred assets.

Art. 13 The balances registered in the deferred asset on the date of entry into force of this Resolution, except for lease losses to be amortized, must be:

I - reclassified to the appropriate asset accounts, according to the nature of the operation, when they refer to items that constitute an asset, in accordance with the regulations in force; and

II - amortized linearly until, at the latest, December 31, 2019, in other cases.

Sole Paragraph. Early derecognition of the deferred asset balances referred to in item II of the main text is permitted.

Art. 14 Lease losses to be amortized registered in the deferred asset must be reclassified to the fixed asset of the lease.

Art. 15 The Central Bank of Brazil is authorized to adopt the necessary measures to comply with this Resolution, including regarding disclosure requirements.

Art. 16 The accounting procedures provided for in Arts. 1 to 11 of this Resolution must be applied prospectively from January 1, 2017.

Art. 17 This Resolution enters into force on the date of its publication.

Art. 18 The following are repealed:

I - Art. 2 of Resolution No. 3,617 of September 30, 2008; and

II - from January 1, 2017, Resolution No. 3,642 of November 26, 2008.

Ilan Goldfajn
President of the Central Bank of Brazil