CVM ORIENTING OPINION NO. 22, OF JANUARY 16, 1991.

SUMMARY: Procedures to be observed by public companies and independent auditors applicable to financial statements relating to fiscal years ending from December 1990. Complement to CVM Orienting Opinion No. 21, of December 27, 1990, on the same subject.

1. INTRODUCTION

This Opinion aims to complement CVM Orienting Opinion No. 21, of December 27, 1990, in view of the various requests, consultations, and suggestions received from entities representing public companies, independent auditors, and securities market analysts.

Although the understandings disseminated by the aforementioned Opinion remain in effect, the orientations presented below aim to resolve remaining doubts, as well as offer alternatives for implementing procedures that, although representative of good accounting technique and supported by legislation, had not yet been practiced.

2. RESERVATIONS IN AUDIT REPORTS

The recommendations of CVM Orienting Opinion No. 21/90 regarding this item are maintained, in the sense that the object of the reservation must be clearly stated in the text of the independent auditors' report; that the reservation, due to its relevance, may lead to the issuance of adverse opinions or disclaimers of opinion; and that quarterly audit reports must not conflict with the opinion on the financial statements closing the fiscal year.

It is important to note that financial statements containing relevant restrictions, in whole or in part, in the independent auditors' report due to non-observance of fundamental accounting principles (or generally accepted accounting principles) will be subject to republication, except in cases where the use of accounting procedures considered technically inadequate is supported by a relevant mandatory legal provision or by express authorization from this CVM.

3. MONETARY UPDATING OF TEMPORARY INVESTMENTS IN STOCKS

Regarding investment in non-monetary assets, investments in stocks of other companies require treatment similar to other non-monetary items under identical inflationary conditions. If, from a technical standpoint, there are no doubts regarding the monetary correction of the stock portfolio, from the perspective of corporate law, it could be interpreted as optional in light of item I of Article 183 of LAW NO. 6,404/76.

Under these conditions, since it is legally optional and considering it necessary to apply the accounting principle of "common monetary denominator," this Securities and Exchange Commission requires, provided it is relevant, the monetary updating of temporary investments in stocks for the purpose of financial statements with full correction. However, considering the difficulties that may be encountered by those public companies that have not maintained managerial control over this type of investment, its adoption will only be required for fiscal years starting from January 1991. Thus, quarters that include the month of March 1991 must include this procedure as mandatory in the respective quarterly information (ITR) in constant purchasing power currency (full correction), with the retroactive effect on opening balances properly computed and reported. However, its application as of December 31, 1990, is not prohibited, computing the retroactive effects as of January 1, 1990.

4. TAX INCENTIVES

It has come to the knowledge of this CVM that Courts have recognized the acquired right of several companies regarding the maintenance of the income tax exemption benefit, classifiable as capital reserve, subject to the understanding contained in item 9 of CVM Orienting Opinion No. 21/90.

Respecting judicial interpretations on the subject, the criteria for accounting and classification that had been adopted by public companies regarding such incentives are maintained.

However, the CVM requires, in financial statements relating to fiscal years that include the month of December 1990, the disclosure of an Explanatory Note that includes at least:

a) the disclosure of the existence or non-existence of a request to the competent authorities for the extension of the exemption; b) the judicial measures already taken and any existing judgments and respective decision instances; c) the treatment given to the exemption resulting from the activities themselves and from affiliated and controlled companies; d) any operational divisions and/or products covered or not by such decisions; e) the values involved per year of exemption; f) the effects on equity, on liabilities, and on the dividend calculation base, especially when resulting from reserves from affiliated or controlled companies.

This Explanatory Note allows, without disregarding the successive judicial decisions on this matter, adequate disclosure of the details involving the respective incentive within each public company.

5. INDEXER

CVM Orienting Opinion No. 21/90 clarifies that the indexer to be used in the monetary correction of the financial statements of public companies in the preparation of their respective complementary statements in constant purchasing power currency is the BTNF (National Treasury Fiscal Bond) or average BTN in applicable cases.

It further clarifies that it is the exclusive responsibility of the management of the public company to decide to use an indexer different from the BTNF, with independent auditors responsible for evaluating such procedure. Therefore, if in the understanding of these managers and/or independent auditors, the use of the BTNF implies relevant effects on the company's equity structure and results, such effects must be disclosed in the manner recommended in CVM Orienting Opinion No. 21/90. Therefore, generic or specific mention regarding the subject in the management report or through any other means of communication will not be admitted under any circumstances, without the effects having been disclosed in the manner prescribed in that Opinion.

6. PRESENT VALUE ADJUSTMENT

The accounting procedure regarding "present value adjustment" is duly explained in Orienting Opinion No. 21/90, leaving no doubts regarding its technical adequacy, nor regarding its support by corporate law.

Although, to date, this procedure has not been implemented for corporate purposes, the concept of "present value adjustment" has already been widely debated in the professional circles of accountants and business administrators specialized in finance and began to be implemented with the advent of CVM INSTRUCTION NO. 64/87, therefore not being unknown, at least within the scope of public companies.

However, considering that many companies did not apply the present value adjustment methodology, because they were not obligated by the aforementioned Instruction (term less than 90 days), the CVM now requires its implementation starting from January 1991, with its effects to be stated in constant currency quarterly information that include the month of March 1991, with the retroactive effect on opening balances properly computed and reported. However, its application as of December 31, 1990, is not prohibited, computing the retroactive effects as of January 1, 1990.

It should be added that on this date, an Instruction from this CVM is being published revoking, from 1991 onwards, the option to only discount to present value with full correction accounts receivable or payable above 90 days.

Finally, and still considering the implementation difficulties as of December 31, 1990, that were brought to the knowledge of this CVM, the accounting recording of present value adjustments is now required to be stated in the financial statements according to corporate law for fiscal years ending from December 1991.

Finally, we clarify that the remaining orientations contained in the aforementioned opinion are maintained in full.

Signed originally by

HUGO ROCHA BRAGA
Superintendent of Accounting Standards

Signed originally by

CARLOS AUGUSTO JUNQUEIRA DE SIQUEIRA
Superintendent of Corporate Relations - Acting

Approved by the Board on 16.01.91.

Publish.

Signed originally by

ARY OSWALDO MATTOS FILHO
President