CVM Resolution 104 Approves Consolidated Technical Pronouncement CPC 23 — CVM — BR

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

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

APPROVED the following Resolution:

Art. 1. It is made mandatory for publicly-held companies to adopt Technical Pronouncement CPC 23, which deals with accounting policies, changes in estimates, and correction of errors, issued by the Technical Pronouncements Committee - CPC, as consolidated in Annex “A” to this Resolution.

Art. 2. Deliberation 592, of September 15, 2009, is revoked, from the effective date of this Resolution.

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

Electronically signed by
Marcelo Barbosa
President

ANNEX “A”
TECHNICAL PRONOUNCEMENTS COMMITTEE
TECHNICAL PRONOUNCEMENT CPC 23
ACCOUNTING POLICIES, CHANGES IN ESTIMATES AND CORRECTION OF ERRORS Correlation to International Accounting Standards - IAS 8

Summary Item
OBJECTIVE 1 – 2
SCOPE 3 – 4
DEFINITIONS 5 – 6
ACCOUNTING POLICIES 7 – 31
Selection and application of accounting policies 7 – 12 Uniformity of accounting policies 13 Changes in accounting policies 14 – 31 Application of changes in accounting policies 19 – 27 Retrospective application 22 Limitation to retrospective application 23 – 27 Disclosure 28 – 31 CHANGES IN ACCOUNTING ESTIMATES 32 – 40 Disclosure 39 – 40 CORRECTION OF ERRORS 41 – 49 Limitation to retrospective restatement 43 – 48 Disclosure of prior period errors 49 IMPRACTICABILITY OF RETROSPECTIVE APPLICATION AND RETSTATEMENT 50 – 53

Objective

The objective of this Pronouncement is to establish criteria for the selection and change of accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates, and correction of errors. The Pronouncement aims to improve the relevance and reliability of the entity's financial statements, as well as to allow comparability over time with the financial statements of other entities.
Disclosure requirements regarding accounting policies, except those relating to changes in accounting policies, are established in Technical Pronouncement CPC 26 - Presentation of Financial Statements.

Scope
3. This Pronouncement shall be applied in the selection and application of accounting policies, as well as in the accounting of changes in accounting policies, changes in accounting estimates, and correction of prior period errors.

The tax effects of corrections of prior period errors and retrospective adjustments made to apply changes in accounting policies are accounted for and disclosed in accordance with Technical Pronouncement CPC 32 – Income Taxes.

Definitions
5. The following terms are used in this Pronouncement with the following meanings:

Accounting policies are the specific principles, bases, conventions, rules, and practices applied by the entity in the preparation and presentation of financial statements.

Change in accounting estimate is an adjustment to the carrying amounts of assets or liabilities, or to the amounts relating to the periodic consumption of assets, resulting from the assessment of the current situation and the expected future obligations and benefits associated with assets and liabilities. Changes in accounting estimates arise from new information or developments and, therefore, are not corrections of errors.

Material is defined in item 7 of CPC 26 and is used in this Pronouncement with the same meaning.

Prior period errors are omissions and misstatements in the entity's financial statements of one or more prior periods resulting from the failure to use, or incorrect use of, reliable information that:
(a) was available when the authorization to disclose the financial statements of those periods; and (b) could reasonably have been obtained and taken into consideration in the preparation and presentation of those financial statements.

Such errors include the effects of mathematical errors, errors in the application of accounting policies, oversights or misinterpretations of facts, and fraud.

Retrospective application is the application of a new accounting policy to transactions, other events, and conditions, as if that policy had always been applied.

Retrospective restatement is the correction of the recognition, measurement, and disclosure of values of elements of financial statements, as if a prior period error had never occurred.

Impracticable application of a requirement occurs when the entity cannot apply it after having made all reasonable efforts to do so. For a particular prior period, it is impracticable to apply retrospectively a change in accounting policy or to make a retrospective restatement to correct an error if:
(a) the effects of the retrospective application or retrospective restatement cannot be determined; (b) the retrospective application or retrospective restatement requires assumptions based on what the Management's intention would have been at that past moment; or (c) the retrospective application or retrospective restatement requires significant estimates of values and it is impossible to objectively identify information about those estimates that:
(i) provides evidence of the circumstances that existed at the date when those values were to be recognized, measured, or disclosed; and (ii) would have been available when the financial statements of that prior period were authorized for disclosure.

Prospective application of a change in accounting policy and recognition of the effect of a change in accounting estimate represents, respectively:
(a) the application of the new accounting policy to transactions, other events, and conditions that occur after the date when the policy is changed; and (b) the recognition of the effect of the change in accounting estimate in the current and future periods affected by the change.

(Eliminated)

Accounting Policies
Selection and application of accounting policies
7. When a Pronouncement, Interpretation, or Guidance applies specifically to a transaction, other event, or circumstance, the accounting policy or policies applied to that item must be determined by applying the Pronouncement, Interpretation, or Guidance, and considering any relevant implementation guides issued by the CPC regarding the Pronouncement, Interpretation, or Guidance in question.

Pronouncements, Interpretations, and Guidelines establish accounting policies that the CPC concluded result in financial statements containing relevant and reliable information about the transactions, other events, and conditions to which they apply. These policies do not need to be applied when the effect of their application is immaterial. However, it is not appropriate to produce, or fail to correct, immaterial misstatements regarding them to achieve a certain presentation of the financial position (balance sheet), performance (income statement), or cash flows of the entity.
Any implementation guides for Pronouncements issued by the CPC are not part of those Pronouncements and, therefore, do not contain requirements for financial statements.
In the absence of a Pronouncement, Interpretation, or Guidance that applies specifically to a transaction, other event, or condition, management shall exercise its judgment in the development and application of an accounting policy that results in information that is:
(a) relevant for economic decision-making by users; and (b) reliable, such that the financial statements:
(i) adequately represent the financial position, financial performance, and cash flows of the entity; (ii) reflect the economic essence of transactions, other events, and conditions, and not merely the legal form; (iii) are neutral, that is, free from bias; (iv) are prudent; and (v) are complete in all material aspects.
In exercising the judgments described in item 10, management must consult and consider the applicability of the following sources in descending order:
(a) the requirements and guidance of pronouncements, interpretations, and guidelines dealing with similar and related matters; and (b) the definitions, recognition criteria, and measurement concepts for assets, liabilities, revenues, and expenses contained in CPC 00 – Conceptual Framework for Financial Reporting.
In exercising the judgments described in item 10, management may also consider the most recent technical positions taken by other standard-setting bodies that use a conceptual framework similar to that of the CPC to develop accounting pronouncements, or other accounting literature and generally accepted industry practices, to the extent that these do not conflict with the sources stated in item 11.

Uniformity of accounting policies
13. The entity must select and apply its accounting policies uniformly for similar transactions, other events, and conditions, unless a Pronouncement, Interpretation, or Guidance specifically requires or permits the classification of items for which different policies may be applied. If a Pronouncement, Interpretation, or Guidance requires or permits such classification, an appropriate accounting policy must be selected and applied uniformly for each category.

Changes in accounting policies
14. The entity must change an accounting policy only if the change:
(a) is required by a Pronouncement, Interpretation, or Guidance; or (b) results in reliable and more relevant information in the financial statements about the effects of transactions, other events, or conditions regarding the financial position, performance, or cash flows of the entity.

Users of financial statements must have the ability to compare the entity's financial statements over time to identify trends in its financial position, performance, and cash flows. Therefore, the same accounting policies must be applied in each period and from one period to another, unless a change in accounting policy is in conformity with one of the criteria stated in item 14.
The following do not constitute changes in accounting policies:
(a) the adoption of an accounting policy for transactions, other events, or conditions that differ in essence from those occurring previously; and (b) the adoption of a new accounting policy for transactions, other events, or conditions that did not occur previously or were immaterial.
The initial application of the asset revaluation policy, when permitted by prevailing legislation and regulation, in conformity with Technical Pronouncement CPC 27 – Property, Plant and Equipment or CPC 04 – Intangible Assets, is a change in accounting policy to be treated as revaluation in accordance with the aforementioned pronouncements, and not in accordance with this Pronouncement.
Items 19 to 31 do not apply to the change in accounting policy described in item 17.

Application of changes in accounting policies
19. Definitions subject to item 23:
(a) The entity must account for a change in accounting policy resulting from the initial adoption of a Pronouncement, Interpretation, or Guidance, in accordance with the specific transitional provisions, if any, expressed in that Pronouncement, Interpretation, or Guidance.
(b) When the entity changes an accounting policy in the initial adoption of a Pronouncement, Interpretation, or Guidance that does not include specific transitional provisions that apply to that change, or when it changes an accounting policy voluntarily, it must apply the change retrospectively.

For the purposes of this Pronouncement, the early adoption of a Pronouncement, Interpretation, or Guidance shall not be considered a voluntary change in accounting policy.
In the absence of a Pronouncement, Interpretation, or Guidance that applies specifically to a transaction, other event, or circumstance, management may, in accordance with item 12, apply an accounting policy derived from a recent pronouncement issued by other technical bodies that use a similar conceptual framework in the development of accounting pronouncements. If, by following a change in such a pronouncement, the entity chooses to change an accounting policy, this change must be accounted for and disclosed as a voluntary change in accounting policy.

Retrospective application
22. Subject to the provisions of item 23, when a change in accounting policy is applied retrospectively, in accordance with items 19(a) or (b), the entity must adjust the opening balance of each component of equity affected for the earliest prior period presented and the other comparative amounts disclosed for each prior period presented, as if the new accounting policy had always been applied.

Limitation to retrospective application
23. When retrospective application is required by items 19(a) or (b), a change in accounting policy must be applied retrospectively, except when it is impracticable to determine the specific effects of the period or the cumulative effect of the change.

When it is impracticable to determine the period-specific effects of the change in accounting policy on comparative information for one or more prior periods presented, the entity must apply the new accounting policy to the opening balances of assets and liabilities of the earliest period for which retrospective application is practicable, which may be the current period, and must make the corresponding adjustment to the opening balance of each component of equity of that period.
When it is impracticable to determine the cumulative effect, at the beginning of the current period, of applying the new accounting policy to all prior periods, the entity must adjust the comparative information to apply the new accounting policy prospectively from the earliest period that is practicable.
When the entity applies the new accounting policy retrospectively, it must apply the new accounting policy to comparative information for prior periods as far back as is practicable. Retrospective application to a prior period may be considered impracticable if it is not practicable to determine the cumulative effect on the opening and closing balances of that period. The value of the resulting adjustment, related to periods prior to those presented in the financial statements, is recorded in the opening balance of each component of equity affected of the earliest prior period presented. Generally, the adjustment is recorded in Retained Earnings or Accumulated Deficit. However, the adjustment may be made in another component of equity (for example, to comply with a specific Pronouncement, Interpretation, or Guidance). Any other information about prior periods, such as historical summaries of financial data, is also adjusted for periods as far back as is practicable.
When it is impracticable for the entity to apply the new accounting policy retrospectively, because it cannot determine the cumulative effect of applying the policy to all prior periods, the entity, in accordance with item 25, must apply the new policy prospectively from the beginning of the earliest practicable period. Therefore, the portion of the cumulative adjustment in assets, liabilities, and equity corresponding to prior periods is ignored. The change in accounting policy is permitted even if it is impracticable to apply the new policy to any prior period. Items 50 to 53 provide guidance on when it is impracticable to apply the new accounting policy to one or more prior periods.

Disclosure
28. When the initial adoption of a Pronouncement, Interpretation, or Guidance has effects in the current period or any prior period, except if it is impracticable to determine the amount to be adjusted, or may have effects in future periods, the entity must disclose:
(a) the title of the Pronouncement, Interpretation, or Guidance; (b) when applicable, that the change in accounting policy is made in accordance with the provisions of the initial application of the Pronouncement, Interpretation, or Guidance; (c) the nature of the change in accounting policy; (d) when applicable, a description of the transitional provisions in the initial adoption; (e) when applicable, the transitional provisions that may have effects in future periods; (f) the amount of adjustments for the current period and for each prior period presented, to the extent that it is practicable:
(i) for each affected item of the financial statement; and (ii) if Technical Pronouncement CPC 41 - Earnings Per Share applies to the entity, for basic and diluted earnings per share.
(g) the amount of the adjustment related to periods prior to those presented, to the extent that it is practicable; and (h) if the retrospective application required by items 19(a) or (b) is impracticable for a particular prior period, or for periods prior to those presented, the circumstances that led to the existence of that condition and a description of how and since when the accounting policy has been applied.

Financial statements of subsequent periods do not need to repeat these disclosures.

When a voluntary change in accounting policies has an effect in the current period or any prior period, except if it is impracticable to determine the amount to be adjusted, or may have effects in future periods, the entity must disclose:
(a) the nature of the change in accounting policy; (b) the reasons why the application of the new accounting policy provides reliable and more relevant information; (c) the amount of the adjustment for the current period and for each prior period presented, to the extent that it is practicable:
(i) for each affected item of the financial statement; and (ii) if Technical Pronouncement CPC 41 - Earnings Per Share applies to the entity, for basic and diluted earnings per share.
(d) the amount of the adjustment related to periods prior to those presented, to the extent that it is practicable; and (e) the circumstances that led to the existence of that condition and a description of how and since when the accounting policy has been applied, if retrospective application is impracticable for a particular prior period, or for periods prior to those presented.

Financial statements of subsequent periods do not need to repeat these disclosures.

When the entity does not early adopt a new Pronouncement, Interpretation, or Guidance already issued, but not yet mandatory, the entity must disclose:
(a) such fact; and
(b) information available or reasonably estimable that is relevant to assess the possible impact of the application of the new Pronouncement, Interpretation, or Guidance on the entity's financial statements in the period of initial application.
In complying with item 30, the entity must disclose:
(a) the title of the new Pronouncement, Interpretation, or Guidance; (b) the nature of the change or changes in accounting policy imminent; (c) the date when the application of the Pronouncement, Interpretation, or Guidance is required; (d) the date when it plans to initially apply the Pronouncement, Interpretation, or Guidance; and (e) the assessment of the impact that the initial application of the Pronouncement, Interpretation, or Guidance is expected to have on the entity's financial statements or, if that information is not available, the reasons why it is not available.

impact if it is not known or reasonably estimable, an explanation regarding this impossibility.

Change in Accounting Estimates

As a consequence of the uncertainties inherent in business activities, many items in the financial statements cannot be measured with precision and can only be estimated. Estimation involves judgments based on the latest available and reliable information. For example, estimates may be required for:
(a) doubtful accounts receivable;
(b) inventory obsolescence;
(c) fair value of financial assets or financial liabilities; (d) useful life of depreciable assets or the expected pattern of consumption of future economic benefits embodied in those assets; and (e) obligations arising from warranties.
The use of reasonable estimates is an essential part of the preparation of financial statements and does not reduce their reliability.
An estimate may need revision if changes occur in the circumstances on which the estimate was based or as a result of new information or greater experience. Given its nature, the revision of an estimate does not relate to prior periods nor does it represent a correction of error.
A change in the measurement basis is a change in accounting policy and not a change in an accounting estimate. When it is difficult to distinguish a change in accounting policy from a change in an accounting estimate, the change is treated as a change in an accounting estimate.
The effect of a change in an accounting estimate that is not a change to which item 37 applies shall be recognized prospectively by including it in the results of:
(a) the period of the change, if the change affects only that period; or (b) the period of the change and future periods, if the change affects both.
If a change in an accounting estimate results in changes in assets and liabilities, or relates to an element of equity, it shall be recognized by adjusting the corresponding item of assets, liabilities, or equity in the period of the change.
Prospective recognition of the effect of a change in an accounting estimate means that the change is applied to transactions, other events, and conditions from the date of the change in the estimate. A change in an accounting estimate may affect only the results of the current period or the results of both the current period and future periods. For example, a change in the estimate of doubtful accounts receivable affects only the results of the current period and, therefore, is recognized in the current period. However, a change in the estimate of the useful life of a depreciable asset, or in the expected pattern of consumption of future economic benefits of such an asset, affects the depreciation of the current period and of each future period during the remaining useful life of the asset. In both cases, the effect of the change related to the current period is recognized as revenue or expense in the current period. The effect, if any, on

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 future periods is recognized as revenue or expense in those future periods.

Disclosure

The entity shall disclose the nature and amount of a change in an accounting estimate that has an effect in the current period or is expected to have an effect in future periods, except when the disclosure of the effect of future periods is impracticable.
If the amount of the effect of future periods is not disclosed because estimating it is impracticable, the entity shall disclose that fact.

Correction of Error

Errors can occur in the recording, measurement, presentation, or disclosure of elements of financial statements. Financial statements will not be in compliance with the Pronouncements, Interpretations, and Guidance of this CPC if they contain material errors or immaterial errors committed intentionally to achieve a particular presentation of the entity’s financial position, performance, or cash flows. Potential errors of the current period discovered in that period must be corrected before the financial statements are authorized for issue. However, material errors are sometimes not discovered until a subsequent period, and these errors of prior periods are corrected in the comparative information presented in the financial statements of that subsequent period (see items 42 to 47).
Subject to the provisions of item 43, the entity shall correct material errors of prior periods retrospectively in the first set of financial statements authorized for issue after the discovery of such errors:
(a) by restating the comparative amounts for the prior period presented in which the error occurred; or (b) if the error occurred before the earliest prior period presented, by restating the opening balances of assets, liabilities, and equity for the earliest prior period presented.

Limitation on Retrospective Restatement

A prior period error shall be corrected by retrospective restatement, except when it is impracticable to determine the period-specific effects of the error or the cumulative effect of the error.
When it is impracticable to determine the effects of an error in a specific period in the comparative information for one or more prior periods presented, the entity shall rectify the opening balances of assets, liabilities, and equity for the earliest period for which retrospective restatement is practicable (which may be the current period).
When it is impracticable to determine the cumulative effect, at the beginning of the current period, of an error in all prior periods, the entity shall rectify the comparative information to correct the error prospectively from the earliest date practicable.

The correction of a prior period error shall be excluded from the results of the period in which the error is discovered. Any information presented about prior periods, including any historical summary of financial data, shall be rectified for periods as far back as is practicable.
When it is impracticable to determine the amount of the error (for example, error in the application of an accounting policy) for all prior periods, the entity, in accordance with item 45, rectifies the comparative information prospectively from the earliest date practicable. In doing so, it ignores that portion of the cumulative rectification of assets, liabilities, and equity relating to periods prior to the date when the error rectification was practicable. Items 50 to 53 provide guidance on when it is impracticable to correct an error for one or more prior periods.
Error corrections differ from changes in accounting estimates. Accounting estimates are, by their nature, approximations that may need revision as additional information becomes known. For example, the gain or loss recognized at the settlement of a contingency, which previously could not be estimated with precision, does not constitute a correction of error.

Disclosure of Prior Period Error

When applying item 42, the entity shall disclose:
(a) the nature of the prior period error;
(b) the amount of the correction for each prior period presented, to the extent that it is practicable:
(i) for each affected line item of the financial statements; and (ii) if Technical Pronouncement CPC 41 – Earnings per Share applies to the entity, for basic and diluted earnings per share; (c) the amount of the correction at the beginning of the earliest prior period presented; and (d) the circumstances that led to the existence of that condition and a description of how and from when the error was corrected, if retrospective restatement is impracticable for a particular prior period.

Financial statements of periods subsequent to the correction of the error do not need to repeat these disclosures.

Impracticability of Application and Retrospective Restatement

In some circumstances, it becomes impracticable to adjust information of one or more prior periods presented for comparison with the current period. For example, necessary information may not have been gathered in a prior period, such that it is not possible to apply a new accounting policy retrospectively (including, for the purposes of items 51 to 53, its application to prior periods) or to retrospectively restate to correct an error attributed to a particular prior period, and it may be impracticable to recreate that information.
It is common to adopt estimates for the application of an accounting policy to elements recognized in the financial statements or disclosed regarding transactions, events, or conditions. Estimates are, by their nature, subjective and may be developed after the balance sheet date, but as time passes, the development of these accounting estimates related to transactions or events occurring in prior periods becomes potentially more difficult, particularly considering that accounting estimates must reflect the conditions existing at that time. However, the objective of estimates related to prior periods must be the same as that of estimates developed in the current period, namely to reflect the circumstances present at the time of the transaction, other event, or other circumstance.
Therefore, applying a new accounting policy retrospectively or correcting a prior period error requires identifying information that:
(a) provides evidence of the circumstances that existed at the time the transaction, other event, or condition occurred, and that were present and available when the financial statements for that prior period were prepared; and (b) would have been available when the financial statements for that prior period were authorized for issue. For some types of estimates (for example, fair value measurement that uses significant unobservable data), it is impracticable to distinguish these types of information. If retrospective application or retrospective restatement requires making a significant estimate for which it is impossible to distinguish these two types of information, it is impracticable to apply the new accounting policy or correct the prior period error retrospectively.
Subsequent perception shall not be used when applying a new accounting policy or when correcting errors attributable to a prior period, nor to make assumptions about what the intentions of management would have been in a prior period, nor to estimate the values recognized, measured, or disclosed in prior periods. For example, when an entity corrects a prior period error in calculating its liability related to employee sick leave, in accordance with CPC 33 – Employee Benefits, it must ignore information about an atypical season of viral illnesses during the following period, which became available after the financial statements of the prior period were authorized for issue. The fact that significant estimates are frequently required when rectifying comparative information presented for prior periods does not prevent the reliable adjustment or correction of the comparative information.

Lineage: No known changes