CVM Resolution 103: Approval of Consolidated Technical Pronouncement CPC 22 on Segment Information

SECURITY AND EXCHANGE COMMISSION OF BRAZIL (CVM) Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – CEP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/SP – CEP: 01333-010 – Brazil - Tel.: (11) 2146-2000 Approves the Consolidation of Technical Pronouncement CPC 22 of the Accounting Pronouncements Committee - CPC, which deals with segment information.

The PRESIDENT OF THE SECURITY AND EXCHANGE COMMISSION OF BRAZIL - CVM makes public that the Collegiate Board, in a meeting held on April 14, 2022, based on §§ 3 and 5 of art. 177 of Law No. 6,404, of December 15, 1976, combined with items II and IV of § 1 of art. 22 of Law No. 6,385, of December 7, 1976, as well as arts. 5 and 14 of Decree No. 10,139, of November 28, 2019,

APPROVED the following Resolution:

Art. 1. It makes mandatory for open capital companies the Technical Pronouncement CPC 22, which deals with segment information, issued by the Accounting Pronouncements Committee - CPC, as consolidated in Annex “A” to this Resolution.

Art. 2. Deliberation 582, of July 31, 2009, is revoked, from the effective date of this Resolution.

Art. 3. This Resolution enters into force on July 1, 2022.

Signed electronically by
Marcelo Barbosa
President

SECURITY AND EXCHANGE COMMISSION OF BRAZIL (CVM) Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – CEP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/SP – CEP: 01333-010 – Brazil - Tel.: (11) 2146-2000
ANNEX “A”
ACCOUNTING PRONOUNCEMENTS COMMITTEE
TECHNICAL PRONOUNCEMENT CPC 22
Segment Information
Correlation to International Financial Reporting Standards – IFRS 8

Summary Item

BASIC PRINCIPLE 1
SCOPE 2 – 4
OPERATING SEGMENT 5 – 10
REPORTABLE SEGMENT 11 – 19
Aggregation criterion 12
Minimum quantitative thresholds 13 – 19
DISCLOSURE 20 – 24
General information 22
Information on profit or loss, assets and liabilities 23 – 24 MEASUREMENT 25 – 30 Reconciliation 28 Representation of previously disclosed information 29 – 30 ENTITY-WIDE DISCLOSURES 31 – 34 Product and service information 32 Geographical area information 33 Information about major customers 34
APPENDIX A – IMPLEMENTATION GUIDE

Basic principle

The entity shall disclose information that enables users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates.

Scope
2. This Pronouncement applies to:
(a) the separate or individual financial statements of the entity:
(i) whose debt or equity instruments are traded in a capital market (a national or foreign stock exchange or an over-the-counter market, including local and regional markets); or (ii) that has filed, or is in the process of filing, its financial statements with the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários) or another regulatory organization, with the purpose of issuing any category of instrument in a capital market; (b) the consolidated financial statements of a parent with its subsidiaries:
(i) whose debt or equity instruments are traded in a capital market (a national or foreign stock exchange or an over-the-counter market, including local and regional markets); or (ii) that has filed, or is in the process of filing, the consolidated financial statements with the Securities and Exchange Commission of Brazil or other regulators, with the purpose of issuing any category of instrument in a capital market.

If an entity that is not required to apply this Pronouncement chooses to disclose segment information that does not comply with this Pronouncement, it shall not classify such information as segment information.
If a financial report contains both the consolidated financial statements of the parent that are within the scope of this Pronouncement and its separate financial statements, segment information is required only for the consolidated financial statements.

Operating segment
5. An operating segment is a component of an entity:
(a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity); (b) whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance; and (c) for which discrete financial information is available. An operating segment may engage in business activities for which it has yet to earn revenues. For example, operations in the start-up phase may be operating segments before earning revenues.

Not all parts of an entity constitute, necessarily, an operating segment or part of an operating segment. For example, the corporate headquarters or some functional departments may not earn revenues or may earn revenues that are only incidental to the entity’s activities and are not operating segments. For the purposes of this Pronouncement, post-employment benefit plans of an entity do not constitute operating segments.
The term “chief operating decision maker” identifies a function, not necessarily a manager with a specific title. That function is to allocate resources and assess the performance of the operating segments of the entity. Frequently, the chief operating decision maker of the entity is its president or chief operating officer, but it may be, for example, a group of executive directors or others.
For many entities, the three characteristics of operating segments described in paragraph 5 clearly define their operating segments. However, the entity may prepare reports in which its business activities are presented in several ways. If the chief operating decision maker uses more than one set of segment information, other factors may identify a single set of components as the entity’s operating segments, such as the nature of the business activities of each component, the existence of managers responsible for those activities, and the information presented to the board of directors.
Generally, an operating segment has a segment manager who reports directly to the chief operating decision maker and maintains regular contact with him to discuss operational activities, financial results, forecasts, or plans for the segment. The term “segment manager” identifies a function, and not necessarily a manager with a specific title. The chief operating decision maker may also be the segment manager for some operating segments. A single manager may be the segment manager for more than one operating segment. If the characteristics stated in paragraph 5 apply to more than one set of components of the organization, but there is only a single set for which the segment managers are responsible, that set of components will constitute the operating segments.
The characteristics stated in paragraph 5 may apply to two or more overlapping sets of components for which there are responsible managers. This structure is sometimes referred to as a matrix form of organization. For example, in some entities, some managers are responsible for several lines of products and services worldwide, while other managers are responsible for specific geographical areas. The chief operating decision maker regularly reviews the operating results of both sets of components, and accounting information is available for both.
In these circumstances, the entity shall determine the set of components that constitutes the operating segments, with reference to the basic principle.

Reportable segment
11. The entity shall disclose information separately about each operating segment that:
(a) has been identified in accordance with paragraphs 5–10 or results from the aggregation of two or more of those segments in accordance with paragraph 12; and (b) exceeds the quantitative thresholds referred to in paragraph 13. Paragraphs 14–19 specify other situations in which separate information about an operating segment shall be disclosed.

Aggregation criterion
12. Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics. For example, if the economic characteristics of two operating segments are similar, similar average gross margins would be expected over the long term. Two or more operating segments may be aggregated into a single operating segment if the aggregation is consistent with the basic principle of this Pronouncement, if the segments have similar economic characteristics, and if they are similar in each of the following respects:
(a) the nature of the products or services;
(b) the nature of the production processes;
(c) the type or class of customer for their products or services; (d) the methods used to distribute their products or provide their services; and (e) if applicable, the nature of the regulatory environment, for example, banks, insurance, or public utilities.

Minimum quantitative thresholds
13. The entity shall separately disclose information about an operating segment that meets any of the following thresholds:
(a) Its reported revenue, including both sales to external customers and sales or transfers to other operating segments, is 10 per cent or more of the combined revenue, internal and external, of all operating segments; (b) The absolute amount of its reported profit or loss is 10 per cent or more of the greater, in absolute amount, of:
(i) the combined reported profit of all operating segments that did not report a loss; and (ii) the combined reported loss of all operating segments that did report a loss;

(c) Its assets are 10 per cent or more of the combined assets of all operating segments.
Operating segments that do not meet any of the minimum quantitative thresholds may be considered reportable and may be presented separately if management believes that information about such segment would be useful to users of the financial statements.

The entity may combine information about operating segments that do not meet the minimum thresholds with information about other operating segments that also do not meet the thresholds, to produce a reportable segment, only if the operating segments have similar economic characteristics and share a majority of the aggregation criteria stated in paragraph 12.
If the total external revenue reported by operating segments constitutes less than 75 per cent of the entity’s revenue, additional operating segments shall be identified as reportable segments (even if they do not satisfy the criteria stated in paragraph 13) until at least 75 per cent of the entity’s revenue is included in reportable segments.
Information about other business activities and non-reportable operating segments shall be combined and presented in an “all other segments” category, separately from other items in the reconciliation required by paragraph 28. The sources of revenues included in the “all other segments” category shall be described.
If management judges that an operating segment defined as reportable in the immediately preceding period continues to be significant, information about that segment shall continue to be disclosed separately in the current period, even if it no longer satisfies the disclosure criteria of paragraph 13.
If an operating segment is defined as a reportable segment in the current period in accordance with the minimum quantitative thresholds, prior period information shall be re-presented for comparative purposes, so as to reflect the new reportable segment, even if that segment did not satisfy the disclosure criteria stated in paragraph 13 in the prior period, unless the necessary information is not available and the cost to obtain it would be excessive.
A practical limit may be established on the number of reportable segments presented separately by the entity, beyond which segment information could become excessively detailed. Although no precise limit is fixed, if the number of reportable segments, in accordance with paragraphs 13–18, exceeds 10, the entity shall consider whether the practical limit has already been reached.

Disclosure
20. The entity shall disclose information that enables users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates.

To apply the principle stated in paragraph 20, the entity shall disclose the following information for each period for which a statement of comprehensive income is presented:
(a) the general information described in paragraph 22; (b) information about the profit or loss recognized by the segments, including the revenues and expenses specific to those segments that comprise the profit or loss of those segments, their respective assets, liabilities, and bases of measurement, as described in paragraphs 23–27; (c) reconciliations of the total revenues of the segments, their respective profit or loss, their assets and liabilities, and other material items with the corresponding amounts of the entity, in accordance with paragraph 28. Reconciliations of balance sheet values for reportable segments with the entity’s balance sheet values shall be made for all dates on which a balance sheet is presented. Prior period information shall be re-presented in accordance with paragraphs 29 and 30.

General information
22. The entity shall disclose the following general information:
(a) the factors used to identify the reportable segments of the entity, including the basis of organization (for example, whether management has chosen to organize the entity around differences between products and services, geographical areas, regulatory environment, or a combination of factors, and whether operating segments have been aggregated) (aa) the judgments made by management in applying the aggregation criteria of paragraph 12. This includes a brief description of the operating segments that have been aggregated in this way and the economic indicators that were assessed in determining that aggregated operating segments have similar economic characteristics; and (b) types of products and services from which each reportable segment obtains its revenues.

Information on profit or loss, assets and liabilities
23. The entity shall disclose the value of the profit or loss of each reportable segment. The entity shall disclose the total value of assets and liabilities of each reportable segment if that value is regularly presented to the chief operating decision maker. The entity shall also disclose the following information about each segment if the specified amounts are included in the segment’s profit or loss value reviewed by the chief operating decision maker, or are regularly presented to him, even if not included in the segment’s profit or loss value:
(a) revenues from external customers;
(b) revenues from transactions with other operating segments of the same entity; (c) interest revenue;

(d) interest expense;
(e) depreciation and amortization;
(f) material items of revenue and expense disclosed in accordance with paragraph 97 of Technical Pronouncement CPC 26 – Presentation of Financial Statements; (g) the entity’s share of the profit or loss of associates and joint ventures accounted for using the equity method; (h) income tax expense or income and social contribution expense; and (i) material non-cash items, except depreciation and amortization. The entity shall disclose interest revenue separately from interest expense for each reportable segment, unless the majority of the segment’s revenues are derived from interest and the chief operating decision maker relies primarily on net interest revenue to evaluate the segment’s performance and make decisions about resources to be allocated to the segment. In that situation, the entity may disclose that segment’s net interest revenue (interest revenue less interest expense) and disclose that it has done so.

The entity shall disclose the following information about each reportable segment if the specified amounts are included in the segment’s asset value reviewed by the chief operating decision maker or are regularly presented to him, even if not included in that segment asset value:
(a) the amount of investments in associates and joint ventures accounted for using the equity method; (b) the amount of additions to non-current assets, except financial instruments, deferred income tax and social contribution assets, post-employment benefit assets (see Technical Pronouncement CPC 33 – Employee Benefits, paragraphs 54–58), and rights arising from insurance contracts.

Measurement
25. The amount of each item of reportable segments shall correspond to the value reported to the chief operating decision maker for the purposes of making decisions about the allocation of resources to the segment and assessing its performance. Adjustments and eliminations made in the preparation of the financial statements and allocations of revenues, expenses, and gains or losses of the entity shall be included in the determination of the reported segment’s profit or loss only if they are included in the profit or loss value of the segment used by the chief operating decision maker. Similarly, only assets and liabilities that are included in the asset and liability values of the segments used by the chief operating decision maker shall be disclosed for that segment. If amounts are allocated to the recognized segment’s result, asset, or liability, those amounts shall be allocated on a reasonable basis.

COMISSÃO DE VALORES MOBILIÁRIOS
Rua Sete de Setembro, 111/2-5º e 23-34º Andares, Centro, Rio de Janeiro/RJ – CEP: 20050-901 – Brasil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2º, 3º e 4º Andares, Bela Vista, São Paulo/ SP – CEP: 01333-010 – Brasil - Tel.: (11) 2146-2000 (b) the total profit or loss values of the reportable segments with the profit or loss of the entity before income tax and social contribution expenses (revenues) and discontinued operations. However, if the entity allocates items such as income tax and social contribution expenses to reportable segments, the entity may reconcile the total profit or loss values of the segments with the profit or loss of the entity after those items; (c) the total assets of the reportable segments with the entity’s assets, if the segment assets are disclosed in accordance with item 23; (d) the total liabilities of the reportable segments with the entity’s liabilities, if the segment liabilities are disclosed in accordance with item 23; (e) the total amounts of any other material items of the disclosed segment information with the corresponding amounts of the entity. All material reconciliation items must be identified and described separately. For example, the amount of each significant adjustment necessary to reconcile the profit or loss of the reportable segment with the profit or loss of the entity, arising from different accounting policies, must be identified and described separately. Restatement of previously disclosed information
29. If the entity changes the structure of its internal organization in a way that alters the composition of its reportable segments, the corresponding information for prior periods, including interim periods, must be restated, unless the information is not available and the cost of its preparation is excessive. The determination of the availability of information and the excessive nature of the cost of its preparation must be made for each disclosure item. After the change in the composition of its reportable segments, the entity must disclose whether it restated the corresponding items of segment information for prior periods.
30. If the entity has changed the structure of its internal organization in a way that changes the composition of its reportable segments and if the segment information for prior periods, including interim periods, is not restated to reflect this change, the entity must disclose in the year the change occurred the segment information for the current period on both the old and new segmentation bases, unless the necessary information is not available and the cost of its preparation is excessive.
Disclosure relating to the entity as a whole
31. Items 32 to 34 apply to all entities subject to this Pronouncement, including entities that have a single reportable segment. The business activities of some entities are not organized based on differences in related products and services or geographic areas of operations. The reportable segments of these entities may disclose revenues from a wide range of essentially different products and services or more than one of its reportable segments may provide essentially the same products and services. Similarly, the entity’s reportable segments may hold assets in different geographic areas and disclose revenues from clients in different geographic areas or more than one of its reportable segments may operate in the same geographic area. The information provided in items 32 to 34 must be provided only if it is not integrated into the reportable segment information required by this Pronouncement.
Product and service information
32. The entity must disclose revenues from external customers for each product and service or each group of similar products and services, unless the necessary information is not available and the cost of its preparation is excessive, in which case such fact must be disclosed. The amounts of disclosed revenues must be based on the information used to prepare the entity’s financial statements.
Geographic area information
33. The entity must disclose the following geographic information, unless the necessary information is not available and the cost of its preparation is excessive:
(a) revenues from external customers:
(i) attributed to the entity’s home country; and (ii) attributed to all foreign countries from which the entity obtains revenues. If revenues from external customers attributed to a particular foreign country are material, they must be disclosed separately. The entity must disclose the basis for attributing revenues from external customers to the different countries; (b) non-current assets, except financial instruments and deferred income tax and social contribution assets, post-employment benefits, and rights arising from insurance contracts:
(i) located in the entity’s home country; and
(ii) located in all foreign countries in which the entity holds assets. If assets in a particular foreign country are material, they must be disclosed separately.
The disclosed amounts must be based on the information used to prepare the entity’s financial statements. If the necessary information is not available and the cost of its preparation is excessive, such fact must be disclosed. The entity may disclose, in addition to the information required by this item, subtotals of geographic information about groups of countries. If information by geographic region within Brazil is relevant, and if this information is used managerially, the same disclosure rules must be observed. Information about major customers
34. The entity must provide information about its degree of dependence on its major customers. If revenues from transactions with a single external customer represent 10% or more of the entity’s total revenues, it must disclose such fact, as well as the total amount of revenues from each of these customers and the identity of the segment or segments in which the revenues are disclosed. The entity is not required to disclose the identity of the major customer nor the disclosed amount of revenues from that customer in each segment. For the purposes of this Pronouncement, a group of entities, which the disclosing entity knows is under common control, must be considered a single customer, as well as the government (national, state, provincial, territorial, local, or foreign) and the entities that the disclosing entity knows are under common control of that government, must be considered a single customer.

APPENDIX A – IMPLEMENTATION GUIDE
This implementation guidance guide accompanies, but is not part of the Pronouncement Introduction A1. This implementation guide provides examples that illustrate the disclosures required by Technical Pronouncement CPC 22 – Segment Information and a diagram to assist in the identification of segments likely to be reported (reportable segments). The formats in the illustrations are not mandatory requirements. This CPC encourages a format that provides the information in the most understandable form in the specific circumstances. The following illustrations are intended for a single hypothetical entity referred to as Diversified Company. Descriptive information about reportable segments of an entity A2. The following items illustrate the disclosure of descriptive information about the reported segments of an entity (the item references are with respect to the relevant requirements in the Pronouncement). Description of the types of products and services from which each reportable segment derives its revenues (item 22(b) Diversified Company has five reportable segments: auto parts, motorboats, software, electronics, and finance. The auto parts segment produces replacement parts for sale to retail auto parts stores. The motorboats segment produces small motorboats to serve the coastal oil industry and similar businesses. The software segment produces application software for sale to computer manufacturers and retailers. The electronics segment produces integrated circuits and related products for sale to computer manufacturers. The finance segment is responsible for part of the company’s financial operations, including financing customer purchases of products from other segments and real estate lending operations. Measurement of profit or loss, assets, and liabilities by operating segment (item 27) The accounting policies of the operating segments are the same as those described in the significant accounting policies, except that the retirement benefit expense of each operating segment is recognized and measured based on cash payments to pension plans. Diversified Company assesses segment performance based on the result of operations before taxes on profit, excluding non-recurring gains and losses and exchange gains and losses. Diversified Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties, i.e., at current market prices.

Lineage: No known changes

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