CVM Resolution 111: Approval of Consolidated Technical Pronouncement CPC 35 (R2) on Separate Financial Statements — CVM — BR

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL (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 35 (R2) of the Accounting Pronouncements Committee – CPC, which deals with separate financial statements.

THE PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION OF BRAZIL - CVM makes it 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 makes mandatory for publicly-held companies the Technical Pronouncement CPC 35 (R2), which deals with separate financial statements, issued by the Accounting Pronouncements Committee - CPC, as consolidated in Annex “A” to this Resolution.

Art. 2. Deliberation 693, of November 8, 2012, is hereby 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

ANNEX “A”
ACCOUNTING PRONOUNCEMENTS COMMITTEE
TECHNICAL PRONOUNCEMENT CPC 35 (R2)
SEPARATE FINANCIAL STATEMENTS
Correlation to International Accounting Standards – IAS 27 (IASB - BV 2012)

Table of Contents Item
OBJECTIVE 1
SCOPE 2 – 3
DEFINITIONS 4 – 8
PREPARATION OF SEPARATE FINANCIAL STATEMENTS 9 – 14 DISCLOSURE 15 – 17 TRANSITIONAL PROVISIONS 18 – 20

Objective

The objective of this Pronouncement is to establish the accounting treatment and disclosures required for investments in subsidiaries, in associates and in joint ventures, when preparing separate financial statements.

Scope
2. This Pronouncement shall be applied in the accounting for investments in subsidiaries, in associates and in joint ventures, whenever the investor entity elects, or is required by local legislation, to present separate financial statements.
3. This Pronouncement does not determine which entities must prepare separate financial statements. It shall be applied whenever the entity prepares separate financial statements that must be in consonance with the Technical Pronouncements, Interpretations and Guidance of the Accounting Pronouncements Committee.

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

Consolidated financial statements are the financial statements of a group through which the assets, liabilities, equity, income, expenses and cash flows of the parent company and its subsidiaries are presented as if they were a single economic entity.

Separate financial statements are those presented by an entity, in which the entity may elect, subject to the requirements of this Pronouncement, to account for investments in subsidiaries, in joint ventures and in associates at cost, in accordance with Technical Pronouncement CPC 38 – Financial Instruments: Recognition and Measurement, or using the equity method, as described in Technical Pronouncement CPC 18 – Investment in Associates, Subsidiaries and Joint Ventures.

The following terms are defined in Appendix A of Technical Pronouncement CPC 36 – Consolidated Financial Statements, Appendix A of Technical Pronouncement CPC 19 – Joint Arrangements and item 3 of Technical Pronouncement CPC 18:

associate
equity method
control of investee
group
investment entity
joint control
joint venture
joint venturer
parent
significant influence
subsidiary.

Separate financial statements are those presented additionally to consolidated financial statements or additionally to the financial statements of an investor that does not have investments in subsidiaries, but has investments in associates or in joint ventures in which the investments in associates or in joint ventures, as required by Technical Pronouncement CPC 18, must be accounted for using the equity method, except in the circumstances provided for in items 8 and 8A.
Financial statements in which the entity does not have investments in subsidiaries, associates or joint ventures are not considered separate financial statements.
The entity that is exempt, in accordance with item 4(a) of Technical Pronouncement CPC 36 – Consolidated Financial Statements, from consolidating its financial statements, or that is exempt, in accordance with item 17 of Technical Pronouncement CPC 18, from applying the equity method, may present, if legally permitted, separate financial statements as its only financial statements.

8A. An investment entity that is required, throughout the current period and all comparative periods presented, to apply the consolidation exception to all its subsidiaries in accordance with item 31 of Technical Pronouncement CPC 36, if legally permitted, may present separate financial statements as its only financial statements.

8B. At the time of issuance of this Pronouncement, the preparation of separate financial statements is an option of the entity. Nevertheless, the entity is required by corporate law to present individual financial statements.

Preparation of separate financial statements
9. Separate financial statements shall be presented in accordance with all applicable Technical Pronouncements, Interpretations and Guidance of the Accounting Pronouncements Committee, except as provided in item 10.

When the entity prepares separate financial statements, it shall account for its investments in subsidiaries, associates and joint ventures based on one of the following alternatives, complying with current legislation:
(a) at historical cost;
(b) in consonance with Technical Pronouncement CPC 38; or (c) using the equity method, as described in Technical Pronouncement CPC 18.
The entity shall apply the same accounting practices for each category of investments.
Investments accounted for at cost or by the equity method must observe Technical Pronouncement CPC 31 – Non-Current Assets Held for Sale and Discontinued Operations, when they are classified as held for sale or for distribution (or included in a group of assets to be disposed of that is classified as held for sale or for distribution). The measurement of investments accounted for in consonance with Technical Pronouncement CPC 38 shall not be modified in these circumstances.
If the entity elects, in accordance with item 18 of Technical Pronouncement CPC 18, to measure its investments in subsidiaries, associates and joint ventures at fair value through profit or loss, in accordance with Technical Pronouncement CPC 38, it shall account for them in the same manner in its separate financial statements.

11A. If the parent is required, in accordance with item 31 of Technical Pronouncement CPC 36, to measure its investment in a subsidiary at fair value through profit or loss, in accordance with Technical Pronouncement CPC 38, it shall also account for its investment in the subsidiary in the same manner in its individual and separate financial statements (the latter, if presented, voluntarily).

11B. When ceasing to be an investment entity or when becoming an investment entity, the parent shall account for the change from the date on which the change in status occurred, as follows:
(a) when the entity ceases to be an investment entity, the entity shall account for the investment in the subsidiary in accordance with item 10. The date of the change in status is the date considered as the acquisition date. The fair value of the subsidiary at the date considered as the acquisition date represents the consideration considered in the accounting of the investment in accordance with item 10; (b) when the entity becomes an investment entity, it shall account for the investment in the subsidiary at fair value through profit or loss, in accordance with Technical Pronouncement CPC 38. The difference between the previous carrying amount of the subsidiary and its fair value at the date of the change in status of the investor shall be recognized as a gain or loss in the statement of profit or loss. The accumulated amount of any gain or loss previously recognized in other comprehensive income in relation to these subsidiaries shall be treated as if the investment entity had disposed of these subsidiaries at the date of the change in status.

Dividends from subsidiaries, associates or joint ventures shall be recognized in the separate financial statements of the entity, when the right to receive them by the entity is established. The dividend shall be recognized in the period’s profit or loss, unless the entity opts to use the equity method, in which case the dividend shall be recognized as a reduction of the carrying amount of the investment.
When the parent company reorganizes the group’s corporate structure in such a way as to establish a new entity as the parent company of the group, in order to satisfy the following criteria:
(a) the new parent company obtains control of the original parent company through the issuance of equity instruments in exchange for existing equity instruments of the original parent company; (b) the assets and liabilities of the new group and the original group are the same, when compared immediately before and after the reorganization; and (c) the owners of the original parent company before the reorganization have the same absolute and relative interests in the net assets of the original group and the new group when comparing these interests immediately before and after the reorganization; and the new parent company accounts for its investments in the original parent company in accordance with item 10(a) in its separate financial statements, the new parent company shall measure at historical cost the carrying amount of its interest in the equity items evidenced in the separate financial statements of the original parent company at the date of the reorganization.
Similarly, the entity that is not the parent company may establish a new entity as its parent in order to satisfy the criterion described in item 13. The requirements of item 13 shall be applied equally in such reorganizations. In these cases, references to “original parent company” and “original group” shall be understood as “original entity”.

Disclosure
15. The entity shall apply all Technical Pronouncements, Interpretations and Guidance of the Accounting Pronouncements Committee when making disclosures in its separate financial statements, including the requirements specified in items 16 and 17.

When the parent company, in accordance with item 4(a) of Technical Pronouncement CPC 36 – Consolidated Financial Statements, decides and is legally able to not prepare consolidated financial statements, if this is legally permitted, by presenting separate financial statements alternatively, it shall disclose in its separate financial statements:
(a) the fact that these are separate financial statements; the fact that the exemption from consolidation provided for in the standard was used; the name and principal address of the entity (and the country of incorporation of the entity, if different) that is its ultimate or intermediate parent company, whose consolidated financial statements, prepared in consonance with the Technical Pronouncements, Interpretations and Guidance of the Accounting Pronouncements Committee, were prepared and made available to the public; and the address where such consolidated financial statements can be obtained; (b) a list of significant investments in subsidiaries, joint ventures and associates, including:
(i) the name of such investees;
(ii) the principal address of such investees (and the country of incorporation of the investee, if different); (iii) the proportion of the investor’s ownership interests in the investee (and the proportion of voting capital, if different); (c) the description of the method used to account for the investments listed in accordance with item 16(b).

16A. When the investment entity that is a parent (except the parent covered by item 16) and prepares, in accordance with item 8A, and if legally permitted, separate financial statements as its only financial statements, it shall disclose this fact. The investment entity shall also present the disclosures related to investment entities required by Technical Pronouncement CPC 45 – Disclosure of Interests in Other Entities. (Included by CPC Revision 04)

When the parent (which is not in the situation described in items 16 and 16A), or the investor with joint control or significant influence in an investee prepares separate financial statements, the parent or the investor shall identify the financial statements prepared in consonance with Technical Pronouncements CPC 36 – Consolidated Financial Statements, CPC 19 – Joint Arrangements and CPC 18 – Investment in Associates, Subsidiaries and Joint Ventures, with which the separate financial statements have a relationship. The parent or the investor shall also disclose in its separate financial statements:
(a) the fact that these are separate financial statements and the reasons why these financial statements were prepared, if not required by law; (b) a list of significant investments in subsidiaries, joint ventures and associates, including:
(i) the name of such investees;
(ii) the principal address of such investees (and the country of incorporation of the investee, if different); (iii) the proportion of the investor’s ownership interests in the investee (and the proportion of voting capital, if different); (c) the description of the method used to account for the investments listed in accordance with item 17(b). The parent company or the investor shall identify the financial statements prepared in consonance with Technical Pronouncements CPC 36 – Consolidated Financial Statements, CPC 19 – Joint Arrangements and CPC 18 – Investment in Associates, Subsidiaries and Joint Ventures, with which the separate financial statements have a relationship.

Transitional Provisions
18. (Eliminated).
18A-18B. (Eliminated).
18C. At the date of initial application, the investment entity, which had previously measured its investment in a subsidiary at cost, shall begin to measure this investment at fair value through profit or loss as if the requirements of this Technical Pronouncement had always been in force. The investment entity shall retrospectively adjust the annual period immediately preceding the date of initial application and adjust retained earnings at the beginning of the period immediately preceding to reflect any difference between:
(a) the previous carrying amount of the investment; and (b) the fair value of the investor’s investment in the subsidiary.

18D. At the date of initial application, the investment entity that had previously measured its investment in a subsidiary at fair value through profit or loss shall continue to measure this investment at fair value. The accumulated amount of any fair value adjustment previously recognized in other comprehensive income shall be transferred to retained earnings at the beginning of the annual period immediately preceding the date of initial application.

18E. At the date of initial application, the investment entity shall not make adjustments to the previous accounting of its interest in a subsidiary that it had previously opted to measure at fair value through profit or loss in accordance with Technical Pronouncement CPC 38, as permitted in item 10.

18F. (Eliminated).

18G. If measuring the investment in the subsidiary in accordance with items 18C to 18F is impracticable (as defined in Technical Pronouncement CPC 23 – Accounting Policies, Changes in Accounting Estimates and Errors), the investment entity shall apply the requirements of this Technical Pronouncement at the beginning of the earliest period for which the application of items 18C to 18F is practicable, which may be the current period. The investor shall retrospectively adjust the annual period immediately preceding the date of initial application, unless the beginning of the earliest period for which the application of this item is practicable is the current period. When the date that is practicable for the investment entity to measure the fair value of the subsidiary is earlier than the beginning of the immediately preceding period, the investor shall adjust equity at the beginning of the period immediately preceding to reflect any difference between:
(a) the previous carrying amount of the investment; and (b) the fair value of the investor’s investment in the subsidiary.
If the earliest period for which the application of this item is practicable is the current period, the equity adjustment shall be recognized at the beginning of the current period.

18H. If the investment entity has disposed of or lost control of the investment in a subsidiary before the date of initial application of the changes, the investment entity is not required to make adjustments to the previous accounting regarding this investment.

18I. Notwithstanding the references to the annual period immediately preceding the date of initial application (immediately preceding period) in items 18C to 18G, the entity may also present adjusted comparative information for any prior periods presented, but is not required to do so. If the entity does present adjusted comparative information for any prior periods, all references to the “immediately preceding period” in items 18C to 18G shall be read as the “oldest presented adjusted comparative period”. If the entity presents unadjusted comparative information for any prior periods, it shall clearly identify the information that was not adjusted, and declare that it was prepared on a different basis and explain that basis.

(Eliminated).
This Pronouncement replaces Technical Pronouncement CPC 35 (R1) – Separate Financial Statements, revised by the Accounting Pronouncements Committee on 03.06.2011.

Lineage: No known changes