CMN Resolution No. 4747 — Establishes accounting criteria for recognition and measurement of non-financial assets held for sale by financial institutions

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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 August 29, 2019, based on Article 4, items VIII and XII, of the aforementioned Law, and considering Article 61 of Law No. 11,941 of May 27, 2009,

R E S O L V E D:

Art. 1 This Resolution establishes accounting criteria for the recognition and measurement of non-financial assets held for sale 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 their legal attributes.

Art. 2 A non-financial asset held for sale is characterized as a non-financial asset not included in the concept of financial asset, according to specific regulation, or the group of disposal, which meets the following conditions:

I - is realized by its sale, is available for immediate sale in its current condition, and its disposal is highly probable within a maximum period of one year; or

II - was received by the institution in settlement of financial instruments of difficult or doubtful recovery not intended for own use.

Sole Paragraph. A group of disposal is considered the group formed by assets not included in the concept of financial asset, according to specific regulation, and liabilities directly associated with these assets, intended for joint disposal.

Art. 3 The non-financial assets held for sale referred to in item I of Article 2 must be reclassified to the appropriate current asset account line on the date the institution decides to sell them.

§ 1 The assets referred to in the main text must be measured at the lower of:

I - the net carrying amount of the asset, less provisions for impairment losses and accumulated depreciation or amortization; and

II - the fair value of the asset, evaluated in accordance with specific regulation, net of selling expenses.

§ 2 The effects resulting from the application of the provisions in the main text on the value of the asset must be recognized as a counterparty to the period's result.

Art. 4 The non-financial assets held for sale referred to in item II of Article 2 must be initially recognized in the appropriate current asset or long-term realizable non-current asset account line, according to the expected sale period, on the date of receipt by the institution.

§ 1 The assets referred to in the main text must be measured at the lower of:

I - the gross carrying amount of the respective financial instrument of difficult or doubtful recovery; and

II - the fair value of the asset, evaluated in accordance with specific regulation, net of selling expenses.

§ 2 Any difference between the carrying amount of the respective financial instrument of difficult or doubtful recovery, net of provisions, and the value measured in accordance with the main text must be recognized in the period's result.

§ 3 For the purposes of the main text, the date of receipt is considered the date on which the institution obtained possession, ownership, and control of the asset.

§ 4 The measurement method referred to in § 1 also applies to the initial measurement of non-financial assets received in settlement of financial instruments of difficult or doubtful recovery that the institution has decided to allocate for own use.

Art. 5 The non-financial assets held for sale that are not sold within a period of one year counted from their reclassification or initial recognition by the institution, according to Articles 3 and 4, must be reclassified to the appropriate long-term non-current realizable asset group.

Art. 6 The institutions mentioned in Article 1 must reevaluate the fair value of non-financial assets held for sale, net of selling expenses, whenever there is evidence or new facts indicating a significant reduction in this value.

§ 1 The institution must evaluate, at least annually, whether there is evidence or new facts indicating a significant reduction in the value referred to in the main text.

§ 2 If the fair value determined in accordance with the main text is lower than the asset's value, measured according to § 1 of Article 3 and § 1 of Article 4 or determined in the last reevaluation, the institution must recognize the difference as an impairment loss.

§ 3 The institution may recognize a gain from an increase in the fair value net of selling expenses of the asset occurring subsequent to the reevaluation referred to in the main text, limited to the accumulated impairment loss recognized in previous periods.

Art. 7 The recognition of depreciation or amortization related to non-financial assets held for sale is prohibited.

Art. 8 If the non-financial asset held for sale is put into use by the institution in its activities, the asset must be reclassified to the appropriate accounting group:

I - at its original carrying amount before being classified as an asset held for sale, adjusted by depreciation or amortization that would have been recognized if the asset had not received this classification, in the case of assets referred to in item I of Article 2;

II - at the lower of its carrying amount on the date of reclassification referred to in the main text or its fair value, in the case of assets referred to in item II of Article 2.

§ 1 The effects resulting from the application of the provisions in the main text on the value of the asset must be recognized as a counterparty to the period's result.

§ 2 After the reclassification referred to in the main text, the specific regulation applicable to the recognition, measurement, and disclosure applicable to the asset, according to its nature, must be observed.

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

Art. 10. The Central Bank of Brazil may determine adjustments in the models adopted by institutions for the fair value measurement of non-financial assets held for sale, if it identifies inadequacy in the definition of these models, including with respect to discount rates to present value and expected sale periods of these assets.

Art. 11. The institutions mentioned in Article 1 must keep available to the Central Bank of Brazil the documentation that clearly and objectively evidences the criteria used for the measurement of non-financial assets held for sale, for a minimum period of five years, counted from the date of measurement, or for a longer period due to legal or regulatory determination.

Art. 12. The institutions mentioned in Article 1 must apply the provisions of this Resolution prospectively from the date of its entry into force.

Art. 13. This Resolution enters into force on January 1, 2021.

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

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