CVM Resolution 107 Approves Consolidated Technical Pronouncement CPC 28 on Investment Property

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 Approves the Consolidation of Technical Pronouncement CPC 28 of the Accounting Pronouncements Committee – CPC, which deals with investment property.

The PRESIDENT OF THE SECURITIES COMMISSION - CVM makes public that the 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 is made mandatory for publicly-held companies the Technical Pronouncement CPC 28, which deals with investment property, issued by the Accounting Pronouncements Committee - CPC, as consolidated in Annex “A” to this Resolution.

Art. 2. Deliberation 584, of July 31, 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

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
ANNEX “A”
ACCOUNTING PRONOUNCEMENTS COMMITTEE
TECHNICAL PRONOUNCEMENT CPC 28
INVESTMENT PROPERTY
Correlation to International Accounting Standards – IAS 40

Objective

The objective of this Pronouncement is to establish the accounting treatment for investment properties and related disclosure requirements.

Summary Item
OBJECTIVE 1
SCOPE 2 – 4
DEFINITIONS 5 – 15
RECOGNITION 16 – 19
INITIAL MEASUREMENT 20 – 29
SUBSEQUENT MEASUREMENT 30 – 56
Accounting policy 30 – 32C
Fair value model 33 – 55
Inability to determine fair value reliably 53 – 55 Cost model 56 TRANSFERS 57 – 65 DISPOSAL 66 – 73 DISCLOSURE 74 – 79 Fair value model and cost model 74 – 79 Fair value model 76 – 78 Cost model 79 TRANSITIONAL PROVISIONS 80 – 84 Fair value model 80 – 82 Cost model 83 – 84

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 Scope
2. This Pronouncement shall be applied in the recognition, measurement and disclosure of investment properties.

(Eliminated).
This pronouncement does not apply to:
(a) biological assets related to agricultural activity (see CPC 29 – Biological Asset and Agricultural Product and CPC 27 – Property, Plant and Equipment); and (b) rights to mineral reserves such as coal, oil, natural gas and similar non-renewable resources.

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

Carrying amount is the amount at which an asset is recognized in the balance sheet.

Cost is the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an asset at the time of its acquisition or construction or, when applicable, the amount attributed to that asset when initially recognized in accordance with specific requirements of other Pronouncements, for example, Technical Pronouncement CPC 10 – Share-Based Payment.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See Technical Pronouncement CPC 46 – Fair Value Measurement).

Investment property is property (land or building – or part of a building – or both) held (by the owner or by the lessee as a right-of-use asset) to earn rentals or for capital appreciation or both, and not for:
(a) use in the production or supply of goods or services or for administrative purposes; or (b) sale in the ordinary course of business.

Owner-occupied property is property held (by the owner or by the lessee as a right-of-use asset)

Classification of property as investment property or owner-occupied property
6. (Eliminated).

Investment properties are held to earn rentals or for capital appreciation or both, and are therefore classified in the Investments subgroup, within Non-Current Assets. Therefore, investment property generates cash flows that are largely independent of the other assets held by the entity. This distinguishes investment properties from owner-occupied properties. The production or supply of goods or services (or the use of properties for administrative purposes) generates cash flows that are attributable not only to the properties, but also to other assets used in the production or supply process. CPC 27 – Property, Plant and Equipment applies to owner-occupied property and CPC 06 applies to owner-occupied property held under lease as a right-of-use asset.
The following are examples of investment properties:
(a) land held for long-term capital appreciation and not for sale in the short term in the ordinary course of business; (b) land held for future use currently undetermined (if the entity has not determined that it will use the land as owner-occupied property or for sale in the short term in the ordinary course of business, the land is considered as held for capital appreciation); (c) building that is owned by the entity (or right-of-use asset relating to a building held by the entity) and that is leased under one or more operating leases; (d) building that is vacant but held to be leased under one or more operating leases; (e) property that is being constructed or developed for future use as investment property.
The following are examples of items that are not investment properties, and are therefore outside the scope of this pronouncement:
(a) property held for sale in the ordinary course of activities or under construction or development for such sale (see CPC 16 – Inventories), such as property acquired exclusively with a view to subsequent disposal in the near future or for development and resale; (b) (eliminated); (c) owner-occupied property (see CPC 27 and CPC 06), including (among other things) property held for future use as owner-occupied property, property held for future development and subsequent use as owner-occupied property, property occupied by employees (whether or not they pay rents at market rates) and owner-occupied property awaiting disposal; (d) (eliminated); (e) property that is leased to another entity under a finance lease.
Some properties comprise a part that is held to earn rentals or for capital appreciation and another part that is held for use in the production or supply of goods or services or for administrative purposes. If these parts can be sold separately (or leased separately under a finance lease), the entity accounts for the parts separately. If the parts cannot be sold separately, the property is investment property only if an insignificant part is held for use in the production or supply of goods or services or for administrative purposes.
In some cases, the entity provides support services to the occupants of the property it holds. The entity treats such property as investment property if the services are insignificant in relation to the arrangement as a whole. An example is when the owner of an office building provides security and maintenance services to tenants occupying the building.
In other cases, the services provided are significant. For example, if the entity owns and operates a hotel, the services provided to guests are significant to the arrangement as a whole. Therefore, the owner-operated hotel is owner-occupied property and not investment property.
It may be difficult to determine whether support services are so significant that a property does not qualify as investment property. For example, a hotel owner sometimes transfers some responsibilities to third parties under a management contract. The terms of such contracts vary widely. At one extreme, the owner's position may, in essence, be that of a passive investor. At the other extreme, the owner may have simply outsourced day-to-day functions, while retaining significant exposure to the risks of cash flows generated by hotel operations.
Judgment is required to determine whether the property qualifies as investment property. The entity develops criteria so that it can exercise this judgment consistently in accordance with the definition of investment property and the related guidance of items 7 to 13. Item 75(c) requires the entity to disclose these criteria when the classification is difficult.

14A. Judgment is also required to determine whether the acquisition of investment property is the acquisition of an asset, a group of assets, or a business combination within the scope of CPC 15 – Business Combinations. Reference should be made to CPC 15 to determine whether it is a business combination. Items 7 to 14 of this Pronouncement discuss whether the property is owner-occupied property or investment property and not whether the acquisition of the property is a business combination, as defined in CPC 15. Determining whether a specific transaction meets the definition of a business combination, as defined in CPC 15, and includes an investment property, as defined in this Pronouncement, requires the separate application of both pronouncements.

In some cases, the entity owns property that is leased and occupied by its parent or another controlled entity. The property does not qualify as investment property in the consolidated financial statements, because the property is occupied by the owner from the group's perspective. However, from the perspective of the entity that owns it, such property is investment property if it satisfies the definition of item 5. Therefore, the lessor treats the property as investment property in its separate financial statements.

Recognition
16. Investment property shall be recognized as an asset when, and only when:
(a) it is probable that future economic benefits associated with the investment property will flow to the entity; and (b) the cost of the investment property can be measured reliably.

The entity assesses under this recognition principle all costs of investment property at the time they are incurred. These costs include costs initially incurred to acquire an investment property and costs incurred subsequently to add to, replace parts of, or provide maintenance to the property.
Under the recognition principle of item 16, the entity does not recognize in the carrying amount of investment property the costs of daily services of the property. Rather, these costs are recognized in the statement of profit or loss when incurred. Daily service costs are basically the costs of labor and consumable goods, and may include the cost of small parts. The purpose of these expenses is often described as being for “repair and maintenance” of the property.
Parts of investment properties may have been acquired by replacement. For example, interior walls may be replacements of the original walls. Under the recognition principle, the entity recognizes in the carrying amount of investment property the cost of the replacement part of the existing investment property at the time the cost is incurred if the recognition criteria are met. The carrying amount of the parts that are replaced is derecognized in accordance with the derecognition provisions of this Pronouncement.

19A. Investment property held by a lessee as a right-of-use asset shall be recognized in accordance with CPC 06.

Initial Measurement
20. Investment property shall be initially measured at its cost. Transaction costs shall be included in the initial measurement.

The cost of a purchased investment property comprises its purchase price and any directly attributable expenditure. Directly attributable expenditures include, for example, professional fees for legal services, property transfer taxes and other transaction costs.
(Eliminated).
The cost of an investment property is not increased by:
(a) start-up costs (unless they are necessary to bring the property to the condition necessary for it to be capable of operating in the manner intended by management); (b) operating losses incurred before the investment property has reached the anticipated level of occupancy; or (c) abnormally large quantities of material, labor or other resources consumed in the construction or development of the property.
If the payment for an investment property is on credit terms, its cost is the cash price equivalent. The difference between this amount and the total payments is recognized as finance expense during the credit period.

25-26. (Eliminated).

One or more investment properties may be acquired in exchange for a non-monetary asset or assets, or in a combination of monetary and non-monetary assets. The following discussion refers to the exchange of a non-monetary asset for another, but also applies to all exchanges described in the preceding sentence. The cost of such investment property is measured at fair value unless (a) the exchange transaction lacks commercial substance or (b) neither the fair value of the asset received nor the fair value of the asset given up is reliably measurable. The acquired asset is measured in this way even if the entity cannot immediately derecognize the asset given up. If the acquired asset is not measured at fair value, its cost is measured at the carrying amount of the asset given up.
The entity must determine whether the exchange transaction is, in substance, of a commercial nature considering the extent to which it expects its future cash flows to be altered as a result of the transaction. The exchange transaction has a commercial nature if:
(a) the configuration (risk, opportunity and value) of the cash flows of the asset received differs from the configuration of the cash flows of the asset given up; or (b) the entity-specific value relative to the part of the entity's operations affected by the transaction changes as a result of the exchange; and (c) the difference in (a) or (b) is significant in relation to the fair value of the assets exchanged. For the purpose of determining whether the exchange transaction has a commercial nature, the entity-specific value relative to the part of the entity's operations affected by the transaction must reflect after-tax cash flows. The result of these analyses may be clear without the entity having to perform detailed calculations.
The fair value of an asset is reliably measurable if (a) the variability in the range of reasonable fair value measurements is not significant for that asset or (b) the probabilities of various estimates within that range can be reasonably assessed and used in measuring the fair value. If the entity is able to reliably measure the fair value of both the asset received and the asset given up, then the fair value of the asset given up shall be used to measure the cost of the asset received, unless the fair value of the asset received is more clearly evident.

29A. Investment property held by a lessee as a right-of-use asset shall be initially measured at cost in accordance with CPC 06.

Subsequent Measurement
Accounting policy
30. With the exceptions indicated in item 32A, the entity must choose as its accounting policy the fair value model, described in items 33 to 55, or the cost model, described in item 56, and must apply that policy to all its investment properties.

Technical Pronouncement CPC 23 – Accounting Policies, Changes in Accounting Estimates and Errors states that a voluntary change in accounting policy shall be made only if the change results in a more appropriate presentation of operations, other events, or conditions in the entity's financial statements. It is highly unlikely that a change from the fair value model to the cost model will result in a more appropriate presentation.
This Technical Pronouncement requires all entities to measure the fair value of investment properties for the purpose of measurement (if the entity uses the fair value model) or disclosure (if it uses the cost model). The entity is encouraged, but not required, to measure the fair value of investment properties based on an appraisal by an independent appraiser who has relevant recognized professional qualifications and recent experience in the location and category of the investment property being appraised.

32A. The entity may:
(a) choose the fair value model or the cost model for all investment properties that support liabilities that pay returns directly linked to the fair value of, or returns on specified assets including this investment property; and (b) choose the fair value model or the cost model for all remaining investment properties, regardless of the choice made in item (a).

32B. Some insurers and other entities operate property funds that issue notional units, with some units held by investors in associated contracts and others held by the entity. Item 32A does not allow the entity to measure property held by the fund partially at cost and partially at fair value.

32C. If the entity chooses different models for the two categories described in item 32A, sales of investment property between sets of assets measured using different models shall be recognized at fair value and the cumulative change in fair value shall be recognized in profit or loss. Accordingly, if investment property is sold from a set using the fair value model to a set using the cost model, the fair value of the property at the date of sale becomes its deemed cost.

Fair value model
33. After initial recognition, an entity that chooses the fair value model shall measure all of its investment properties at fair value, except in the cases described in item 53.

(Eliminated).
Gains or losses arising from changes in the fair value of investment property shall be recognized in the statement of profit or loss for the period in which they occur.

36-39. (Eliminated).

When measuring the fair value of investment property, in accordance with Technical Pronouncement CPC 46, the entity must ensure that the fair value reflects, among other things, income from current leases and other assumptions that market participants would use in pricing investment property under current market conditions.
When the lessee uses the fair value model to measure investment property that is held as a right-of-use asset, it must measure the right-of-use asset, and not the underlying property, at fair value.
CPC 06 specifies the basis for initial recognition of the cost of investment property held by a lessee as a right-of-use asset. Item 33 requires that investment property held by a lessee as a right-of-use asset be remeasured to fair value, if necessary, if the entity chooses the fair value model. When lease payments are made at market rates, the fair value of the investment property held by the lessee as a right-of-use asset at acquisition, net of all expected lease payments (including those related to recognized lease liabilities), must be zero. Thus, remeasuring the lessee's lease right-of-use asset from cost, in accordance with CPC 06, to fair value, in accordance with item 33 (taking into account the requirements of item 50), should not result in any initial gain or loss, unless the fair value is measured at different times. This may occur when the choice is made to apply the fair value method after initial recognition.

42-47. (Eliminated).

In exceptional cases, there is clear evidence, when the entity acquires for the first time an investment property (or when existing property becomes investment property for the first time after a change in its use), that the variability in the range of reasonable fair value measurements would be so great, and the probabilities of the various outcomes so difficult to assess, that the usefulness of a single fair value measurement is denied. This may indicate that the fair value of the property will not be measurable reliably on a continuous basis (see item 53).
(Eliminated).
When determining the fair value of investment property, the entity must not double-count assets or liabilities that are recognized as separate assets or liabilities. For example:
(a) equipment, such as an elevator or air conditioning, is often an integral part of a building and is generally included in the fair value of the investment property, not being recognized separately as fixed assets; (b) if the office is rented furnished, the fair value of the office generally includes the fair value of the furniture, because the rental income relates to the furnished office. When the furniture is included in the fair value of the investment property, the entity does not recognize the furniture as a separate asset; (c) the fair value of the investment property excludes the profit from the operating lease added or paid in advance, because the entity recognizes it as a separate liability or asset; (d) the fair value of the investment property, held by the lessee as a right-of-use asset, reflects the expected cash flows (including variable lease payments expected to become payable). Accordingly, if the valuation obtained for the property is net of all expected payments to be made, it will be necessary to add back any recognized lease liability to reach the

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 accounting value of the investment property, using the fair value method.

(Eliminated).
In some cases, the entity expects that the present value of its payments related to an investment property (which are not payments related to recognized liabilities) will exceed the present value of its respective cash receipts. The entity applies Technical Pronouncement CPC 25 – Provisions, Contingent Liabilities and Contingent Assets to determine if it recognizes a liability and, in that case, how to measure it.

Inability to determine fair value reliably

There is a rebuttable presumption that the entity can reliably measure the fair value of investment property on a continuous basis. However, in exceptional cases, when the entity acquires, for the first time, the investment property (or when the existing property becomes investment property for the first time following the completion of construction or development, or after a change in use), there is clear evidence that the fair value of the investment property is not measurable reliably on a continuous basis. This occurs when, and only when, the market for comparable properties is inactive (for example, there are few recent transactions, quoted prices are not current, or observed transaction prices indicate that the seller was forced to sell) and when reliable alternative measurements of fair value are not available (for example, based on discounted cash flow projections). If the entity concludes that the fair value of investment property under construction is not measurable reliably, but it is expected that the fair value of the property will be measurable reliably when construction is completed, the investment property under construction must be measured at cost until its fair value becomes reliably measurable or construction is completed (whichever occurs first). If the entity concludes that the fair value of investment property (other than investment property under construction) is not reliably measurable, the entity must measure this investment property using the cost method of CPC 27 – Fixed Assets for its own investment property or, in accordance with CPC 06, for investment property held by a lessee as a right-of-use asset. The residual value of the investment property must be assumed to be zero. The entity must continue to apply CPC 27 or CPC 06 until the disposal of the investment property.

53A. Once the entity becomes able to reliably measure the fair value of investment property under construction that has been previously valued at cost, it must measure this property at fair value. As soon as construction is completed, it is presumed that fair value can be measured reliably. If this is not the case, in accordance with item 53, the property must be accounted for using the cost method, in accordance with CPC 27 – Fixed Assets, for own assets, or with CPC 06, for investment property held by a lessee as a right-of-use asset.

53B. The presumption that the fair value of investment in property under construction can be measured reliably can be rebutted only at initial recognition. An entity that has measured an item of investment in property under construction at fair value cannot conclude that the fair value of the investment in property when completed cannot be

In the exceptional cases where the entity is compelled, for the reason given in item 53, to measure the investment property using the cost method in accordance with CPC 27 or CPC 06, it must measure all its other investment properties at fair value, including investment properties under construction. In these cases, although the entity may use the cost method for one investment property, the entity must continue to account for each of the remaining properties using the fair value method.
If the entity has previously measured the investment property at fair value, it must continue to measure the property at fair value until disposal (or until the property becomes owner-occupied or the entity begins to develop the property for subsequent sale in the ordinary course of business), even if comparable market transactions become less frequent or market prices become less readily available.

Cost method

After initial recognition, the entity that chooses the cost model must measure the investment property:
(a) in accordance with CPC 31 – Non-Current Asset Held for Sale and Discontinued Operations, if it meets the criteria to be classified as held for sale (or is included in a disposal group that is classified as held for sale); (b) in accordance with CPC 06, if it is held by a lessee as a right-of-use asset and is not held for sale, in accordance with CPC 31; and (c) in accordance with the requirements of CPC 27 for the cost model in all other cases.

Transfer

The entity must transfer property to, or from, investment property when, and only when, there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A change in the management's intentions for the use of the property alone does not provide evidence of a change in use. Examples of evidence of a change in use include:
(a) commencement of owner-occupation, or development with a view to owner-occupation, for the transfer of investment property to owner-occupied property; (b) commencement of development with a view to sale, for the transfer of investment property to inventory; (c) end of owner-occupation, for the transfer of owner-occupied property to investment property; and (d) commencement of an operating lease to another entity, for the transfer of inventory to investment property; (e) (eliminated).
When the entity decides to dispose of the investment property without development, it continues to treat the property as investment property until it is derecognized (removed from the balance sheet) and ceases to reclassify it as inventory. Similarly, if the entity begins to develop the existing investment property again for continued future use as investment property, the property remains investment property, not being reclassified as owner-occupied property during the new development.
Items 60 to 65 apply to the recognition and measurement aspects resulting when the entity uses the fair value method for investment properties. When the entity uses the cost method, transfers between investment properties, owner-occupied properties, and inventory do not change the carrying amount of the transferred property and do not change the cost of this property for purposes of measurement or disclosure.
For the transfer of investment property accounted for at fair value to owner-occupied property or to inventory, the deemed cost of the property for subsequent accounting, in accordance with CPC 27, CPC 06, or CPC 16, must be its fair value on the date of the change in use.
If the owner-occupied property becomes investment property that is accounted for at fair value, the entity must apply CPC 27 for own property and CPC 06 for property held by a lessee as a right-of-use asset until the date of the change in use. The entity must treat any difference on that date between the carrying amount of the property, in accordance with CPC 27 or CPC 06, and its fair value, as described in item 62.
Until the date on which the owner-occupied property becomes investment property accounted for at fair value, the entity must depreciate the property (or the right-of-use asset) and must recognize any impairment losses that have occurred. The entity must treat any difference on that date between the carrying amount of the property, in accordance with CPC 27 or CPC 06, and its fair value as follows:
(a) any resulting decrease in the carrying amount of the property is recognized in profit or loss. However, to the extent that the amount is included in a previously carried out revaluation of this property, the decrease is debited against this revaluation surplus; (b) any resulting increase in the carrying amount is treated as follows:
(i) to the extent that the increase reverses a previous impairment loss of this property, the increase is recognized in profit or loss. The amount recognized in profit or loss cannot exceed the amount necessary to restore the carrying amount to the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognized; (ii) any remaining part of the increase is credited directly to equity, in equity valuation adjustments, as part of other comprehensive income. On subsequent disposal of the investment property, any revaluation surplus included in equity must be transferred to accumulated profits or losses, and the transfer of the remaining balance of the excess valuation surplus is also made directly to accumulated profits or losses, and not through the statement of profit or loss.
For a transfer of inventory to investment property that is accounted for at fair value, any difference between the fair value of the property on that date and its previous carrying amount

The treatment of transfer of inventory to investment property that is accounted for at fair value is consistent with the treatment of sale of inventory.
When the entity completes the construction or development of investment property under construction of its own that will be accounted for at fair value, any difference between the fair value of the property on that date and its previous carrying amount must be recognized in profit or loss.

Disposal

Investment property must be derecognized (removed from the balance sheet) upon disposal or when the investment property is permanently withdrawn from use and no economic benefit is expected from its disposal.
The disposal of investment property may be achieved by sale or by the conclusion of a finance lease. The date of disposal of the investment property, which is sold, is the date when the recipient obtains control of the investment property, in accordance with the requirements of CPC 47, which determine when the performance obligation is satisfied. CPC 06 is applicable to the disposal effected by the conclusion of a finance lease and to sale and leaseback.
If, in accordance with the recognition principle of item 16, the entity recognizes in the asset carrying amount the cost of replacement of part of the investment property, then it derecognizes the carrying amount of the replaced part. With respect to investment property accounted for using the cost method, the replaced part may not be the part that was depreciated separately. If it is not practicable for the entity to determine the carrying amount of the replaced part, it may use the cost of the replacement as an indication of the cost of the replaced part that was at the time it was acquired or constructed. Under the fair value method, the fair value of the investment property may already reflect the fact that the part to be replaced has lost its value. In other cases, it may be difficult to discern how much of the fair value should be reduced for the part to be replaced. An alternative to reducing the fair value for the replaced part, when it is not practical to make this reduction, is to include the cost of the replacement in the carrying amount of the asset and revalue the fair value, as would be required for additions not involving replacement.
Gains or losses arising from the withdrawal or disposal of investment properties must be determined as the difference between the net proceeds of disposal and the carrying amount of the asset and must be recognized in profit or loss (unless CPC 06 – Leases requires another form in the case of sale and leaseback) in the period of withdrawal or disposal.
The value of the consideration for the disposal of investment property must be established in accordance with the requirements for determining the transaction price in items 47 to 72 of CPC 47. Subsequent changes in the estimated value of the consideration, included in the gain or loss, must be accounted for in accordance with the requirements for changes in transaction price in CPC 47.
The entity applies Technical Pronouncement CPC 25 – Provisions, Contingent Liabilities and Contingent Assets or other Pronouncements, Interpretations and Guidelines, as appropriate, to any liabilities it holds after the disposal of an investment property.

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
72. Compensation from third parties for investment property that has suffered impairment, loss, or has been transferred must be recognized in profit or loss when it becomes receivable.

Impairment losses or losses of investment property, related to claims for or payment of compensation from third parties and any subsequent acquisition or construction of replacement assets constitute separate economic events and are accounted for separately as follows:
(a) impairment losses of the investment property are recognized in accordance with Technical Pronouncement CPC 01; (b) withdrawals or disposals of the investment property are recognized in accordance with items 66 to 71 of this Pronouncement; (c) compensation from third parties for investment property that has suffered impairment, has suffered loss, or has been transferred is recognized in profit or loss when it becomes receivable; and (d) the cost of restored, purchased, or constructed assets as replacements is determined in accordance with items 20 to 29 of this Pronouncement.

Disclosure

Fair value method and cost method

The disclosures indicated below are applicable in addition to those stated in CPC 06. In accordance with CPC 06, the owner of investment property provides the disclosures of lessors regarding leases they have entered into. The lessee who holds investment property as a right-of-use asset provides disclosures of lessees, as required by CPC 06, and disclosures of lessors, as required by CPC 06, for any operating lease they have entered into.
The entity must disclose:
(a) whether it applies the fair value method or the cost method; (b) (eliminated); (c) when classification is difficult (see item 14), the criteria it uses to distinguish investment properties from owner-occupied properties and properties held for sale in the ordinary course of business; (d) (eliminated); (e) the extent to which the fair value of the investment property (as measured or disclosed in the financial statements) is based on an appraisal by an independent appraiser who possesses recognized professional qualifications and relevant recent experience in the location and category of the investment property being appraised. If no such appraisal has been made, this fact must be disclosed; (f) the amounts recognized in profit or loss for:
(i) rental income from investment property;
(ii) direct operating expenses (including repairs and maintenance) arising from investment properties that have generated rental income during the period; (iii) direct operating expenses (including repairs and maintenance) arising from

COMMISSION FOR SECURITIES AND CAPITAL MARKETS
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

investment properties that have not generated income during the period; and (iv) the cumulative change in fair value recognized in profit or loss with the sale of an investment property from a group of assets where the cost method is used to a group where the fair value method is used (see item 32C).
(g) the existence and amounts of restrictions on the ability to realize investment properties or the remittance of profits and receipts from alienation; (h) contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance or increases.

Fair Value Method
76. In addition to the disclosures required by item 75, an entity that applies the fair value method from items 33 to 55 must disclose a reconciliation between the carrying amounts of investment property at the beginning and end of the period, showing the following:
(a) additions, disclosing separately the additions resulting from acquisitions and those resulting from subsequent expenditure recognized in the carrying amount of the asset; (b) additions resulting from acquisitions through business combinations; (c) assets classified as held for sale or included in a disposal group classified as held for sale in accordance with Technical Pronouncement CPC 31 – Non-Current Asset Held for Sale and Discontinued Operations and other disposals; (d) net gains or losses arising from fair value adjustments; (e) net exchange differences resulting from the translation of financial statements into another presentation currency, and from the translation of a foreign operation into the presentation currency of the reporting entity; (f) transfers to and from inventory and owner-occupied property; and (g) other changes.

When the valuation obtained for investment property is adjusted significantly for the purpose of the financial statements, such as to avoid double counting of assets or liabilities that are recognized as separate assets and liabilities, as described in item 50, the entity must disclose the reconciliation between the obtained valuation and the adjusted valuation included in the financial statements, showing separately the aggregate amount of any recognized lease liabilities that have been added back, and any other significant adjustment.
In the exceptional cases referred to in item 53, when the entity measures investment property using the cost method of CPC 27 or in accordance with CPC 06, the reconciliation required by item 76 must disclose the amounts related to this investment property separately from the amounts related to other investment properties. In addition, the entity must disclose:
(a) description of the investment property;
(b) explanation of the reason why fair value cannot be measured reliably; (c) if possible, the range of estimates within which it is highly probable that the fair value will fall; and (d) upon the disposal of the unregistered investment property not measured at fair value:
(i) the fact that the entity disposed of the investment property not measured at fair value;

(ii) the carrying amount of this investment property at the time of sale; and (iii) the amount of gain or loss recognized.

Cost Method
79. In addition to the disclosures required by item 75, an entity that applies the cost method of item 56 must disclose:
(a) the depreciation methods used;
(b) the useful lives or depreciation rates used; (c) the gross carrying amount and accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period; (d) the reconciliation of the carrying amount of investment property at the beginning and end of the period, showing the following:
(i) additions, disclosing separately the additions resulting from acquisitions and those resulting from subsequent expenditure recognized as an asset; (ii) additions resulting from acquisitions through business combinations; (iii) assets classified as held for sale or included in a disposal group classified as held for sale in accordance with Technical Pronouncement CPC 31 – Non-Current Asset Held for Sale and Discontinued Operations and other disposals; (iv) depreciation; (v) the amount of impairment losses recognized and the amount of impairment losses reversed during the period in accordance with Technical Pronouncement CPC 01; (vi) net exchange differences resulting from the translation of financial statements into another presentation currency, and from the translation of a foreign operation into the presentation currency of the reporting entity; (vii) transfers to and from inventories and owner-occupied property; and (viii) other changes; and (e) the fair value of investment properties. In the exceptional cases described in item 53, when the entity cannot measure the fair value of the investment property reliably, it must disclose:
(i) description of the investment property;
(ii) explanation of the reason why fair value cannot be determined reliably; and (iii) if possible, the range of estimates within which it is highly probable that the fair value will fall.

Transitional Provisions
Fair Value Method
80. An entity that has previously applied the concepts of this Pronouncement and chooses for the first time to classify and account for some or all interests in eligible properties held under operating leases as investment property must recognize the effect of this choice as an adjustment to the opening balance of retained earnings of the period in which the choice was initially made. In addition:
(a) if the entity has previously publicly disclosed (in the financial statements or otherwise) the fair value of these properties in prior periods (measured on a

that satisfies the definition of fair value of Technical Pronouncement CPC 46), the entity is encouraged, but not required, to:
(i) adjust the opening balance of retained earnings for the most recent presented period whose fair value was publicly disclosed; and (ii) restate the comparative information for those periods; and (b) if the entity has not previously publicly disclosed the information described in item (a), the entity must not restate the comparative information and must disclose this fact.

This Pronouncement requires treatment different from that required by Technical Pronouncement CPC 23 – Accounting Policies, Changes in Accounting Estimates and Errors. This Pronouncement requires that comparative information be restated, unless such restatement is impracticable.
When the entity applies this Pronouncement for the first time, the adjustment to the opening balance of accumulated profits or losses includes the reclassification of any amount held in the revaluation surplus of the investment property.

Cost Method
83. Technical Pronouncement CPC 23 applies to any changes in accounting policies made when the entity applies this Pronouncement for the first time and opts to use the cost method. The effect of the change in accounting policies includes the reclassification of any amount held in the revaluation surplus of the investment property.

The requirements of items 27 to 29 regarding the initial measurement of investment property acquired in an asset exchange transaction must be applied prospectively, only to future transactions.

84A. Due to the inclusion of item 14A, the entity must apply this change prospectively to acquisitions of investment properties from the beginning of the first period in which it adopts this change. Consequently, the accounting for acquisitions of investment properties in prior periods must not be adjusted. However, the entity may opt to apply the change to individual acquisitions of investment property that occurred before the beginning of the first annual period occurring on or after the effective date, only if the information necessary to apply the change to these prior transactions is available to the entity.

84B. (Eliminated).

Transfer of Investment Property
84C. At the date of initial application of the changes in items 57 and 58, the entity must reevaluate the classification of the properties held on that date and, if applicable, reclassify the property applying items 7 to 14 to reflect the conditions existing on that date.

84D. Notwithstanding the requirements of item 84C, the entity is permitted to apply the changes described in items 57 and 58 retrospectively, in accordance with CPC 23 if, and only if, this is possible with the use of information available at the time.

84E. If, in accordance with item 84C, the entity reclassifies the property on the date of initial application, the entity must:
(a) account for the reclassification by applying the requirements of items 59 to 64. When applying items 59 to 64, the entity must:
(i) read any reference to the date of change in use as the date of initial application; and (ii) recognize any amount that, in accordance with items 59 to 64, would have been recognized in profit or loss as an adjustment to the opening balance of accumulated profits on the date of initial application; (b) disclose the values reclassified to, or from, investment property in accordance with item 84C. The entity must disclose the reclassified amounts as part of the reconciliation of the amount accounted for as investment property at the beginning and end of the period, as required in items 76 and 79.

CVM Resolution 107 Approves Consolidated Technical Pronouncement CPC 28 on Investment Property

Lineage: In force