CMN Resolution No. 4535 — Criteria for Recognition and Accounting Recording of Fixed Asset Components for Use

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:

Article 1. Financial institutions and other institutions authorized to operate by the Central Bank of Brazil must record in the use-based fixed assets their own tangible assets and improvements made on third-party real estate, destined for the maintenance of their activities or having this purpose for a period exceeding one fiscal year.

Sole Paragraph. 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 duties.

Article 2. Use-based fixed assets must be recognized at cost value, which comprises:

I - the cash purchase or construction price, plus any applicable import taxes and non-recoverable taxes on the purchase;

II - other directly attributable costs necessary to place the asset in the location and condition for its operation; and

III - the initial estimate of the costs to dismantle and remove the asset and to restore the site where it is located, if the institution assumes the obligation to bear such costs upon the acquisition of the asset.

Sole Paragraph. In the installment acquisition of use-based fixed assets, the difference between the cash price of the asset and the total payments must be allocated monthly, pro rata temporis, to the appropriate expense account, in accordance with the accrual basis of accounting.

Article 3. Capital investments in use-based fixed assets, including those related to land intended for future use due to construction, manufacturing, assembly, or installation, must be recorded provisionally in a specific line item for fixed assets under construction.

Sole Paragraph. If the investments specified in the main text are not completed within a period of up to three years, the amounts recorded in accordance with the main text must be reclassified to current assets.

Article 4. Tangible 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 use-based fixed assets, if they are destined for the maintenance of the institution's activities or have this purpose for a period exceeding 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 transaction must be recognized in liabilities as a counterpart to the period's result.

Article 5. Expenses with additions, improvements, or substitutions of components in use-based fixed assets that effectively increase its economic useful life, efficiency, or productivity may be added to the asset's book value.

Sole Paragraph. Expenses incurred to maintain or restore the institution's fixed assets or leased fixed assets in normal operating conditions, which do not increase their production capacity or useful life, must be recognized as expenses of the period in which they occur.

Article 6. Depreciation of use-based fixed assets must be recognized monthly as a counterpart to a specific operational expense account.

§ 1. For the purposes of this article, it is considered:

I - depreciation, the systematic allocation of the depreciable value of a use-based fixed asset over its useful life;

II - depreciable value, the difference between the cost value of an asset and its residual value;

III - residual value, the estimated value 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; and

IV - useful life, the period of time during which the entity expects to use the asset.

§ 2. Each component of a use-based fixed asset with significant cost relative to the total cost of the asset must be depreciated separately.

§ 3. Depreciation must correspond to the depreciable value divided by the useful life of the asset, calculated linearly, from the moment the asset is available for use.

§ 4. Estimates of the residual value and useful life of use-based fixed assets must be reviewed at the end of each fiscal year or whenever there is a significant change in previous estimates.

Article 7. The book value of a use-based fixed asset must be derecognized upon its disposal or when there is no expectation of future economic benefits from its use or disposal.

§ 1. In the installment sale of use-based fixed assets, the difference between the cash price and the total expected receipts must be allocated monthly to the appropriate revenue account, in accordance with the accrual basis of accounting.

§ 2. The gain or loss resulting from the derecognition of a use-based fixed asset, determined by the difference between the net value obtained from the disposal, if any, and the book value of the asset, must be recognized in the period's result when derecognized.

Article 8. The institutions mentioned in Article 1 must transfer from use-based fixed assets to current assets, at the lower of book value or market value less costs necessary for sale:

I - the substantial portion of assets not used in their activities; and

II - assets whose use in their activities has been discontinued.

Article 9. The Central Bank of Brazil is authorized to adopt the necessary measures to comply with this Resolution, including regarding disclosure requirements.

Article 10. The accounting procedures established by this Resolution must be applied prospectively starting from January 1, 2017.

Article 11. This Resolution enters into force on the date of its publication.

Article 12. Resolution No. 3,617 of September 30, 2008, is revoked, effective from January 1, 2017.

Ilan Goldfajn
President of the Central Bank of Brazil