CMN Resolution No. 4720 — General Criteria for Preparation and Disclosure of Financial Statements by Financial Institutions

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 May 30, 2019, based on Article 4, items VIII and XII, of the aforementioned Law, and considering the provisions of Article 61 of Law No. 11,941, of May 27, 2009,

R E S O L V E D:

CHAPTER I

OBJECT AND SCOPE OF APPLICATION

Art. 1 This Resolution establishes the general criteria for the preparation and disclosure of financial statements by financial institutions and other 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 regulation issued by the Central Bank of Brazil, in the exercise of its legal powers.

CHAPTER II

MANDATORY FINANCIAL STATEMENTS

Art. 2 The institutions mentioned in Art. 1 must prepare and disclose the following annual financial statements, relating to the fiscal year, and semi-annual, relating to the semesters ended on June 30 and December 31:

I - Balance Sheet;

II - Statement of Profit or Loss;

III - Statement of Comprehensive Income;

IV - Statement of Cash Flows; and

V - Statement of Changes in Equity.

§ 1 The financial statements mentioned in the caput must be disclosed accompanied by their respective explanatory notes.

§ 2 The preparation and disclosure of the financial statements referred to in the caput is mandatory from the date of publication of the authorization to operate in the Official Gazette of the Union.

§ 3 Institutions constituted as closed capital companies, single credit cooperatives, and microentrepreneur and small business credit companies that have equity, on the base date of December 31 of the immediately preceding fiscal year, less than R$2,000,000.00 (two million reais), are exempt from the preparation and publication of the Statement of Cash Flows.

§ 4 An institution that holds branches abroad must disclose the financial statements referred to in the caput with the consolidated position of operations carried out in the country and abroad.

§ 5 The semi-annual financial statements relating to the semesters ended on June 30 may be accompanied by selected explanatory notes, in accordance with the procedures defined by the Central Bank of Brazil.

Art. 3 In the preparation and disclosure of the Statement of Cash Flows, the institutions mentioned in Art. 1 must observe, in addition to the provisions of this Resolution, Technical Pronouncement CPC 03 (R2) – Statement of Cash Flows, approved by the Accounting Pronouncements Committee (CPC) on September 3, 2010.

§ 1 The technical pronouncements cited in the text of CPC 03 (R2), while not received by specific act of the National Monetary Council, cannot be applied.

§ 2 The references to other pronouncements in the text of CPC 03 (R2), for the purposes of this Resolution, must be interpreted as references to CPC pronouncements that have been received by the National Monetary Council, as well as to other regulatory provisions.

CHAPTER III

INTERMEDIATE FINANCIAL STATEMENTS

Art. 4 The institutions mentioned in Art. 1 that, voluntarily or by virtue of legal, statutory, and contractual provisions or special situations, prepare and disclose intermediate financial statements, must disclose the set of financial statements provided for in Art. 2:

I - prepared in accordance with the provisions applicable to semi-annual and annual statements; or

II - prepared in a condensed form, including selected explanatory notes, in accordance with the procedures defined by the Central Bank of Brazil.

Sole paragraph. For the purposes of this Resolution, intermediate financial statements are considered those relating to periods of less than six months.

Art. 5 In the preparation of intermediate financial statements, institutions must apply the same criteria, procedures, practices, and accounting policies applied in semi-annual and annual statements.

CHAPTER IV

PRESENTATION OF FINANCIAL STATEMENTS

Art. 6 The institutions mentioned in Art. 1 must, in the preparation and disclosure of the financial statements referred to in this Resolution, appropriately represent the financial and equity position, performance, and cash flows of the institution, in accordance with the definitions and recognition criteria for assets, liabilities, revenues, and expenses provided for in current regulation.

§ 1 For the purposes of the caput, the institution must:

I - assume the continuity of its activities in the foreseeable future, unless management intends to liquidate the institution or cease its business, or still has no realistic alternative but its discontinuation;

II - present separately each relevant class of similar items, segregating items of different nature or function, unless they are not relevant;

III - observe that assets and liabilities, revenues and expenses:

a) must be recognized according to the accrual basis; and

b) cannot be offset, unless required or permitted by specific regulation issued by the National Monetary Council or the Central Bank of Brazil;

IV - disclose comparative information regarding the previous period for all values presented in the current period's financial statements, as well as for narrative and descriptive information that may be presented, if relevant to the understanding of the set of statements;

V - maintain consistency in the presentation and classification of various items in the financial statements from one period to another, unless there is a distinct determination in regulation issued by the National Monetary Council or the Central Bank of Brazil, or if a change in presentation or classification represents reliable and more relevant information for the user; and

VI - present additional information to that required in current regulation if the requirements established therein are insufficient to allow the understanding of the impact of certain transactions, events, and conditions on the financial and equity position and performance of the institution.

§ 2 In situations of discontinuation of the institution mentioned in item I of § 1, the financial statements must be prepared on a different basis, considering the discontinuation situation, and this basis must be disclosed in explanatory notes.

§ 3 Financial information, including that relating to accounting policies, must be presented in a manner that provides relevant, reliable, comparable, and understandable information.

§ 4 The institution, when observing the provision of item II of § 1, cannot hide information, so as to reduce the clarity and understandability of its financial statements.

§ 5 The accrual basis referred to in item III of § 1 does not apply to the Statement of Cash Flows.

Art. 7 The institutions mentioned in Art. 1 must declare in explanatory notes, explicitly and without reservation, that the financial statements are in conformity with the regulation issued by the National Monetary Council and the Central Bank of Brazil.

CHAPTER V

DISCLOSURE OF FINANCIAL STATEMENTS

Art. 8 Subject to the other legal and regulatory provisions in force, the financial statements referred to in this Resolution must be disclosed on the institution's website or in an internet repository of free public access, which has the specific purpose of disclosing accounting and financial documents.

§ 1 In the case of substitution or exclusion of statements disclosed on the institution's website or in the repository mentioned in the caput, the institution must:

I - keep the substituted documents available to the Central Bank of Brazil for a period of at least five years; and

II - disclose the facts determining the substitution or exclusion of the financial statements on the same site or repository where the substituted or excluded statements were disclosed.

§ 2 Credit cooperatives are permitted to disclose their financial statements on the website of the central cooperative or the confederation to which they are affiliated, on the internet.

Art. 9 The financial statements referred to in this Resolution must be disclosed accompanied by the independent auditor's report, observing specific regulation, and the administration's report on social business and the main administrative facts of the period.

Art. 10 The financial statements referred to in this Resolution must be signed by the administrators and the director responsible for the institution's accounting and by a legally qualified accountant.

Art. 11 The Central Bank of Brazil may, without prejudice to other measures applicable, determine new disclosure of the financial statements referred to in this Resolution, with the corrections deemed necessary for the appropriate representation of the equity and profit items and cash flows mentioned in Art. 6.

Sole paragraph. The institution must make the new disclosure, as provided in the caput, in the same communication channels used for the first disclosure, with the same prominence and with explicit mention in explanatory notes of the facts determining the new disclosure.

CHAPTER VI

FINAL PROVISIONS

Art. 12 The Central Bank of Brazil is authorized to issue norms and adopt measures deemed necessary for the execution of the provisions of this Resolution, including regarding the deadlines for disclosure, the form, content, and method of preparation of financial statements.

Art. 13 The accounting procedures established by this Resolution must be applied prospectively for financial statements relating to base dates from January 2020.

Art. 14 The Regulation Annex to Resolution No. 3,198, of May 27, 2004, shall enter into force with the following alteration:

“Art. 21. ..................................................

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§ 3 The reports of the independent auditor relating to the semi-annual and annual financial statements of institutions constituted as open capital companies or those classified in Segment 1 (S1), Segment 2 (S2), or Segment 3 (S3), according to current regulation, must contain the communication of the main audit matters.” (NR)

Art. 15 The following are repealed:

I - Art. 14 of the Regulation annexed to Resolution No. 1,120, of April 4, 1986;

II - Art. 15 of the Regulation annexed to Resolution No. 1,655, of October 26, 1989;

III - Circular No. 1,561, of December 29, 1989;

IV - Circular No. 2,039 of September 13, 1991;

V - Circular No. 2,804, of February 11, 1998; and

VI - Resolution No. 3,604, of August 29, 2008.

Art. 16 This Resolution enters into force on January 1, 2020.

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