CVM Orienting Opinion No. 39 of December 20, 2021: Publication of Summarized Financial Statements

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL
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ORIENTING OPINION CVM NO. 39, OF DECEMBER 20, 2021 Publication of summarized financial statements.

1. Object of this Orienting Opinion
   This orienting opinion seeks to provide concreteness to the publication requirements to be observed in summarized financial statements, in accordance with the changes introduced into Article 289, items I and II, of Law No. 6,404 of December 15, 1976, by Law No. 13,818 of April 24, 2019, with effect from January 1, 2022.

In light of technological evolution and the migration of content to digital format, the cost of publishing complete financial statements in printed newspapers has become a subject of criticism, especially considering the legal requirement for simultaneous disclosure of summarized financial statements in a newspaper of large circulation published in the locality where the company's headquarters is located and on the same newspaper's internet page, in addition to making the complete information available, in the case of publicly-held companies, on the pages of the Securities and Exchange Commission, the market administrator entity, and the company itself.

In this sense, the new modality of summarized publication of financial statements requires special attention so that the objective of the legal provision is met, in the sense of simplifying and reducing the compliance costs for companies, while at the same time providing essential information about the financial statements, the explanatory notes, the independent auditor's report, and, if applicable, the fiscal council's opinion.

2. Summarized Financial Statements
   The new wording of Art. 289, I and II, of Law No. 6,404/76 creates a special form for the publication of summarized financial statements in printed newspapers, allowing the company to publish in an disaggregated manner the values of individually relevant account groups and in an aggregated manner the values of individually less relevant account groups. All summarized financial statements must be prepared based on the audited numbers of the complete financial statements, which must be duly disclosed at an electronic address clearly referenced in the summarized publication.

To avoid any doubts from readers of the summarized financial statements, these must be preceded by the following highlighted notices:

1. Notice: The financial statements presented below are summarized financial statements and should not be considered in isolation for decision-making. Understanding the financial and equity situation of the company requires reading the complete audited financial statements, prepared in accordance with corporate legislation and applicable accounting regulation.

2. The complete audited financial statements, including the respective independent auditor's report, are available at the following electronic addresses:
   a) [Insert the electronic address of the large-circulation newspaper of the publication]; b) [Insert the company's electronic address, if Company registered in Category A]; c) [Insert the CVM's electronic address]; d) [Insert B3's electronic address in the case of listed companies].

Summarized financial statements for a given fiscal year must present comparative information with the previous year, in less detail than the complete financial statements; however, they must still be a consistent structured representation of the company's performance and equity position.

In this sense, the CVM understands that, to achieve the results expected by the legal provision, administrators of publicly-held companies and other involved agents must disclose, comparatively with the data from the previous fiscal year, at least the following information:

a) Summarized balance sheet, presented in a condensed form, encompassing, at minimum, the values related to the following account groups:
I. Current Assets, subdivided, at minimum, into Cash and Equivalents, Financial Investments, Securities and Financial Instruments, Accounts Receivable, Inventories, Taxes Recoverable, and Other Current Assets;

II. Non-Current Assets, subdivided, at minimum, into Long-Term Realizable, Investments, Investment Properties, Property, Plant and Equipment, Biological Assets, Right-of-Use Assets, Intangible Assets, and Other Non-Current Assets;

III. Current Liabilities, subdivided, at minimum, into Suppliers, Salaries and Benefits Payable, Social Charges, Tax Obligations, Short-Term Loans and Financing, Income Tax (IR) and Social Contribution (CS) Payable, Provisions, and Other Current Liabilities;

IV. Non-Current Liabilities, subdivided, at minimum, into Loans and Financing, Lease Liabilities, Deferred IR and CS, Provisions, and Other Non-Current Liabilities;

V. Equity divided into Share Capital, Capital Reserves, Valuation Adjustments (Accumulated Other Comprehensive Income), Profit Reserves, Accumulated Profits or Losses, and Other Equity Items.

b) Summarized statement of profit or loss, presented in a condensed form, encompassing, at minimum, the values related to net sales revenue, cost of products, goods, or services sold, gross profit, selling, general, and administrative expenses, impairment losses, other operating expenses and revenues, equity method earnings, profit or loss before financial result and taxes, financial result, profit or loss before income tax, income tax and social contribution expense, and net profit or loss for the period;

c) Summarized statement of comprehensive income, presented in a condensed form, encompassing, at minimum, the values related to net profit or loss for the period, other comprehensive income items that will not be reclassified to profit or loss, other comprehensive income items that may be reclassified to profit or loss, and total comprehensive income for the period;

d) Summarized statement of cash flows, presented in a condensed form, encompassing, at minimum, net cash generated by operating activities, net cash generated (used) by investing activities, net cash generated (used) by financing activities, increase (decrease) in cash and cash equivalents during the period, cash and cash equivalents at the beginning of the period, and cash and cash equivalents at the end of the period;

e) Summarized statement of changes in equity, presented in a condensed form, encompassing, at minimum, variations related to share capital, variations in capital reserves, variations in valuation adjustment accounts (accumulated other comprehensive income), variations in profit reserves, and variations in accumulated profits or losses and other equity variations;

f) Summarized statement of added value, presented in a condensed form, encompassing, at minimum, revenue, inputs acquired from third parties, gross added value, depreciation, amortization, and depletion, net added value produced by the company, added value received in transfer, total added value to be distributed, and the distribution of added value, separating distribution to personnel and administrators, distribution to government (taxes, fees, and contributions), remuneration of third-party capital, and remuneration of own capital.

The company must evaluate the adequacy of the suggested summarized disclosure and, if it deems necessary more detailed segregation of any accounts or sub-accounts in its summarized financial statements, it must do so. If any of the above-listed account groups does not have a balance or if it is not material, its presentation may be suppressed.

Financial institutions that are publicly-held companies must evaluate, within the same scope of the requirements presented above and in alignment with the regulation of the National Monetary Council, the best way to present summarized financial statements.

3. Explanatory Notes
   The new wording of Art. 289, II, of Law No. 6,404/76 allows for the disclosure of relevant excerpts of the explanatory notes. It is emphasized that, in the same way as the accounting pieces listed in item 2 of this Orienting Opinion, summarized explanatory notes must be prepared from the complete explanatory notes of the audited financial statements, which must be duly disclosed at an electronic address clearly referenced in the summarized publication.

Summarized explanatory notes must encompass, at minimum, the following information:
a) Brief operational context of the company; b) Bases of preparation and presentation of the financial statements; c) Changes in accounting practices compared to the previous fiscal year; d) Critical and discretionary accounting policies; e) Relevant subsequent events.

The company must evaluate the adequacy of the suggested disclosure of summarized explanatory notes and, if it identifies other information considered relevant and essential for understanding its summarized financial statements, it must add them to the summarized explanatory notes.

It is also recommended that the proposal for the allocation of results be disclosed in the summarized publication, discriminating, if applicable, the calculation basis of dividends, including dividends already paid during the fiscal year and the amount of dividend per share.

4. Summarized Independent Auditor's Report and Summarized Fiscal Council Opinion
   The new wording of Art. 289, II, of Law No. 6,404/76 allows for the disclosure of relevant excerpts of the independent auditor's report and the Fiscal Council's opinion, when applicable.

Summarized Independent Auditor's Report
It is emphasized that the summarized independent auditor's report must be prepared from the complete independent auditor's report, which must be duly disclosed at an electronic address clearly referenced in the summarized publication.

The summarized independent auditor's report must contain, at minimum:
(i) type of opinion (unmodified or modified, specifying whether qualified opinion, adverse opinion, or disclaimer of opinion); (ii) a summary of matters that led to modifications in the auditor's opinion, if applicable; (iii) declaration regarding the existence of a report on the complete financial statements; (iv) where the auditor's report is available; and (v) date of issuance of the report.

It is important to highlight that the publication of an "excerpt of relevant information from the report" consists of including a declaration about the content of the report and does not confuse with the publication of parts of the report, nor does it consist of an opinion on the summarized financial statements being published.

The independent auditor must verify that the information published in condensed form is consistent with the complete audited financial statements and with the report issued by the independent auditor regarding these complete financial statements, in line with the provisions of Article 25, I of CVM Resolution 23/2021.

Summarized Fiscal Council Opinion
The summarized fiscal council opinion must be prepared from the complete fiscal council opinion, which must be duly disclosed at an electronic address clearly referenced in the summarized publication.

The summarized fiscal council opinion must contain, at minimum, the fiscal council's opinion on the process of preparation and the content of the financial statements and the annual administration report, including mention if there was a dissenting vote and other matters considered essential by the fiscal council.

5. References to LAJIDA (EBITDA) and LAJIR (EBIT)
   Any references to the terms LAJIDA (EBITDA) and LAJIR (EBIT), including their respective adjusted versions, i.e., Adjusted EBITDA or Adjusted EBIT, in the publication referred to by this orienting opinion, must be obligatorily accompanied by a reconciliation of the values presented, whereby all numbers disclosed in this reconciliation must appear in the Company's Financial Statements, in strict observance of CVM Instruction No. 527/2012 and aligned with the information contained in the Administration Report accompanying the Company's Financial Statements.

6. Application and effects of this opinion
   The CVM understands that the procedures described above are adequate forms of complying with the conditions provided for in Article 289, I and II, of Law No. 6,404/76, introduced by Law No. 13,818/2019, with effect from January 1, 2022. However, the procedures described in this opinion are not exclusive nor exhaustive. In the exercise of its regulatory and punitive competence, the CVM may admit the use of other modes of compliance with legal duties.

Finally, in the application of this Opinion, the CVM will observe, when applicable, Art. 2, sole paragraph, XIII of Law No. 9,784 of January 29, 1999, which prohibits the retroactive incidence of new interpretation, and Decree-Law No. 4,657 of September 4, 1942, as amended by Law No. 13,655 of April 25, 2018, which provides for legal certainty and efficiency in the creation and application of public law.

Approved by the Collegiate Body in a meeting held on December 16, 2021.
Signed electronically by
MARCELO BARBOSA
President