CVM Resolution 114 Approves Consolidated Technical Pronouncement CPC 45 on Disclosure of Interests in Other Entities — CVM — BR

COMMISSION OF SECURITIES AND EXCHANGE COMMISSION – CVM Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Centro, 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 45 of the Technical Pronouncements Committee – CPC, which deals with disclosure of interests in other entities.

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 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 to adopt Technical Pronouncement CPC 45, which deals with disclosure of interests in other entities, issued by the Technical Pronouncements Committee - CPC, as consolidated in annex “A” to this Resolution.

Art. 2. Deliberation 697, of December 13, 2012, 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 45
Disclosure of Interests in Other Entities
Correlation to International Financial Reporting Standards – IFRS 12 (IASB – BV 2012)

Summary Item
OBJECTIVE 1 – 4
Achieving the objective 2
SCOPE 5 – 6
SIGNIFICANT JUDGMENTS AND ASSUMPTIONS 7 – 9
Investment entity status 9A – 9B
INTERESTS IN SUBSIDIARIES 10 – 19
Non-controlling interests’ share in the group’s activities and cash flows 12 Nature and extent of significant restrictions 13 Nature of risks associated with the entity’s interests in consolidated structured entities 14 – 17 Change in controlling entity’s ownership interest in a subsidiary that does not result in loss of control 18 Loss of control of a subsidiary during the reporting period 19 Interests in unconsolidated subsidiaries (investment entities) 19A – 19G INTERESTS IN JOINT OPERATIONS AND ASSOCIATES 20 – 23 Nature, extent and financial effects of the entity’s interests in joint operations and associates 21 – 22 Risks associated with the entity’s interests in jointly controlled entities (joint ventures) and associates 23 INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES 24 – 31 Nature of interests 26 – 28 Nature of risks 29 – 31
APPENDIX A – Definition of terms

APPENDIX B – Implementation Guide

Objective

The objective of this Pronouncement is to require the entity to disclose information that enables users of its financial statements to evaluate:
(a) the nature of its interests in other entities and the risks associated with such interests; and (b) the effects of these interests on its financial position, financial performance and cash flows.

Achieving the objective
2. To achieve the objective of item 1, the entity must disclose:
(a) the judgments used and significant assumptions considered to determine:
(i) the nature of its interest in another entity or business; (ii) the type of joint business in which it has an interest (items 7 to 9); (iii) that it meets the definition of an investment entity, if applicable (item 9A); and (b) information about its interests in:
(i) subsidiaries (items 10 to 19);
(ii) joint operations and associates (items 20 to 23); and (iii) structured entities that are not controlled by the entity (unconsolidated structured entities) (items 24 to 31).

If the disclosures required by this Pronouncement, together with the disclosures required by other Pronouncements, Interpretations and Guidance from the CPC, do not achieve the objective of item 1, the entity must disclose any additional information necessary to achieve that objective.
The entity must consider the level of detail necessary to achieve the disclosure objective and the emphasis that should be given to each of the requirements of this Pronouncement. It must aggregate or disaggregate disclosures so that useful information is not obscured, either by the inclusion of

insignificant amounts of detail or by aggregating items that have different characteristics (see items B2 to B6).

Scope
5. This Pronouncement must be applied by an entity that has an interest in any of the following situations:
(a) subsidiaries;
(b) joint operations (i.e., joint operations or jointly controlled entities (joint ventures)); (c) associates; (d) unconsolidated structured entities.

5A. Except as described in item B17, the requirements in this pronouncement apply to interests of an entity listed in item 5 that are classified (or included in a group classified for disposal) as held for sale or discontinued operations in accordance with CPC 31 – Non-Current Asset Held for Sale and Discontinued Operation.

This pronouncement does not apply to:
(a) post-employment benefit plans or other long-term employee benefit plans to which CPC 33 – Employee Benefits applies; (b) separate financial statements of an entity to which CPC 35 – Separate Financial Statements applies.
However:
(i) if the entity has interests in unconsolidated structured entities and prepares separate financial statements as its only financial statements, it must apply the requirements of items 24 to 31 when preparing these separate financial statements; (ii) the investment entity that prepares financial statements in which all its subsidiaries are measured at fair value through profit or loss, in accordance with item 31 of CPC 36, must present the disclosures regarding investment entities required by this pronouncement; (c) interest held by an entity that has an interest in a joint operation, but that does not have joint control of that joint operation, unless its interest results in significant influence over the arrangement or constitutes an interest in a structured entity;

(d) interest in another entity that is accounted for in accordance with CPC 48 – Financial Instruments. However, the entity must apply this Pronouncement:
(i) when this interest is an interest in an associate or jointly controlled entity (joint venture) that, in accordance with CPC 18 – Investment in Associate, Subsidiary and Jointly Controlled Entity, is measured at fair value through profit or loss; or (ii) when this interest is an interest in an unconsolidated structured entity.

Significant judgments and assumptions
7. The entity must disclose information about significant judgments and assumptions it has made (and changes to these judgments and assumptions) when determining:
(a) that it controls another entity, i.e., an investee, as described in items 5 and 6 of Technical Pronouncement CPC 36 – Consolidated Financial Statements; (b) that it has joint control of a business or significant influence over another entity; and (c) the type of joint business (i.e., joint operation or jointly controlled entity (joint venture)) when the business has been structured through a separate vehicle.

The significant judgments and assumptions disclosed in accordance with item 7 include those adopted by the entity when changes in facts and circumstances are such that the conclusion about whether it has control, joint control or significant influence changes during the reporting period.
To comply with item 7, the entity must disclose, for example, significant judgments and assumptions adopted when determining whether:
(a) it does not control another entity, even though it holds more than half of the voting rights of the other entity; (b) it controls another entity, even though it holds less than half of the voting rights of the other entity; (c) it is an agent or principal (see items 58 to 72 of Technical Pronouncement CPC 36 – Consolidated Financial Statements);

(d) it does not have significant influence, even though it holds 20% or more of the voting rights of another entity; (e) it has significant influence, even though it holds less than 20% of the voting rights of another entity.

Investment entity status
9A. When the parent qualifies as an investment entity in accordance with item 27 of Technical Pronouncement CPC 36, the investment entity must disclose information about significant judgments and assumptions it has adopted when determining that it is an investment entity. If the investment entity does not have one or more of the typical characteristics of an investment entity (see item 28 of Technical Pronouncement CPC 36), it must disclose its reasons for concluding that it is still defined as an investment entity.

9B. When it becomes or ceases to be an investment entity, the entity must disclose the change in investment entity status and the reasons for the change. In addition, the entity that becomes an investment entity must disclose the effect of the change in status on the financial statements for the period presented, including:
(a) the total fair value, at the date of the change in status, of subsidiaries that ceased to be consolidated; (b) the total gain or loss, if any, calculated in accordance with item B101 of Technical Pronouncement CPC 36; and (c) the line item in the statement of profit or loss in which the gain or loss is recognized (if not presented separately).

Interest in subsidiary
10. The entity must disclose information that enables users of its consolidated financial statements to:
(a) understand:
(i) the composition of the economic group; and (ii) the share of non-controlling interests in the activities and cash flows of the economic group (see item 12); and (b) evaluate:

(i) the nature and extent of significant restrictions on its ability to access or use assets and settle liabilities of the group (see item 13); (ii) the nature of risks associated with its interests in consolidated structured entities and changes in these risks (see items 14 to 17); (iii) the effects of changes in its ownership interest in a subsidiary that do not result in loss of control (see item 18); and (iv) the effects of the loss of control of a subsidiary during the reporting period (see item 19).

When the financial statements of a subsidiary used in the preparation of consolidated financial statements relate to a date or period different from that of the consolidated financial statements (see items B92 and B93 of Technical Pronouncement CPC 36), the entity must disclose:
(a) the end date of the reporting period of the financial statements of that subsidiary; and (b) the reason for using a different date or period.

Non-controlling interests’ share in the group’s activities and cash flows
12. The entity must disclose for each of its subsidiaries that has non-controlling interests that are material to the reporting entity:
(a) the name of the subsidiary;
(b) the location (and country of incorporation, if different from the location) of the subsidiary; (c) the proportion of ownership interests held by non-controlling interests; (d) the proportion of voting rights held by non-controlling interests, if different from the proportion of ownership interests held; (e) the profits and losses allocated to the non-controlling interest of the subsidiary during the reporting period; (f) accumulated non-controlling interest of the subsidiary at the end of the reporting period; (g) summarized financial information about the subsidiary (see item B10).

Nature and extent of significant restrictions
13. The entity must disclose:
(a) significant restrictions (e.g., legal, contractual and regulatory restrictions) on its ability to access or use assets and settle liabilities of the group, such as:

(i) those that restrict the ability of the parent or its subsidiaries to transfer cash or other assets to (or from) other entities within the economic group; (ii) guarantees or other requirements that may restrict dividends and other distributions of capital from being paid or loans and advances being made or paid to (or by) other entities within the economic group; (b) the nature and extent to which non-controlling interests’ protection rights may significantly restrict the entity’s ability to access or use assets and settle liabilities of the group (e.g., when the parent is required to settle liabilities of a subsidiary before settling its own liabilities or when approval of non-controlling interests is required either to access assets or to settle liabilities of a subsidiary); (c) the carrying amounts, in the consolidated financial statements, of assets and liabilities to which these restrictions apply.

Nature of risks associated with the entity’s interests in consolidated structured entities
14. The entity must disclose the terms of any contractual agreements that may require the parent or its subsidiaries to provide financial support to a consolidated structured entity, including events or circumstances that may expose the reporting entity to a loss (e.g., liquidity agreements or credit rating triggers associated with obligations to purchase assets of the structured entity or to provide financial support).

If, during the reporting period, the parent or any of its subsidiaries has, without having a contractual obligation to do so, provided financial or other support to a consolidated structured entity (e.g., by acquiring assets of the structured entity or instruments issued by it), the entity must disclose:
(a) the type and value of support provided, including situations in which the parent or its subsidiaries have assisted the structured entity in obtaining financial support; and (b) the reasons for providing the support.
If, during the reporting period, the parent or any of its subsidiaries has, without having a contractual obligation to do so, provided financial or other support to a previously unconsolidated structured entity and this provision of support has resulted in the entity gaining control of the structured entity, the entity must disclose an explanation of the relevant factors leading to this decision.
The entity must disclose any current intentions to provide financial support, or other type of support, to a consolidated structured entity, including intentions to assist the structured entity in obtaining financial support.

Change in controlling entity’s ownership interest in a subsidiary that does not result in loss of control
18. The entity must present a schedule showing the effects on the equity attributable to the owners of the parent of any changes in ownership interest in a subsidiary that do not result in loss of control.

Loss of control of a subsidiary during the reporting period
19. The entity must disclose the gain or loss, if any, calculated in accordance with item 25 of Technical Pronouncement CPC 36 and:
(a) the portion of that gain or loss attributable to the measurement of any retained investment in the former subsidiary, at its fair value at the date when control is lost; and (b) the line items in the statement of profit or loss in which the gain or loss is recognized (if not presented separately).

Interests in unconsolidated subsidiaries (investment entities) 19A. The investment entity, which, in accordance with Technical Pronouncement CPC 36, is required to apply the consolidation exception and, consequently, accounts for its investment in a subsidiary at fair value through profit or loss, must disclose this fact.

19B. For each unconsolidated subsidiary, the investment entity must disclose:
(a) the name of the subsidiary;
(b) the location (and country of incorporation, if different from the location) of the subsidiary; and

(c) the proportion of ownership interest held by the investment entity and, if different, the proportion of voting rights held.

19C. If the investment entity is the parent of another investment entity, the parent must also provide the disclosures contained in 19B(a) to (c) for investments that are controlled by its subsidiary qualified as an investment entity. The disclosure may be provided by including, in the parent’s financial statements, the financial statements of the subsidiary (or subsidiaries) that contain the above information.

19D. The investment entity must disclose:
(a) the nature and extent of any significant restrictions (e.g., resulting from loan agreements, regulatory requirements or contractual agreements) on the ability of an unconsolidated subsidiary to transfer resources to the investment entity in the form of cash dividends or to repay loans or advances made to the unconsolidated subsidiary by the investment entity; and (b) any current commitments or intentions to provide financial support or other to an unconsolidated subsidiary, including commitments or intentions to assist the subsidiary in obtaining financial support.

19E. If, during the period of the financial statements, the investment entity or any of its subsidiaries has, without having a contractual obligation to do so, provided financial or other type of support to an unconsolidated subsidiary (e.g., by acquiring assets of the subsidiary or instruments issued by it or assisting it in obtaining financial support), the entity must disclose:
(a) the type and value of support provided to each unconsolidated subsidiary; and (b) the reasons for providing the support.

19F. The investment entity must disclose the terms of any contractual agreements that could require the entity or its unconsolidated subsidiaries to provide financial support to the unconsolidated, controlled and structured entity, including events or circumstances that could expose the entity disclosing its financial statements to a loss (e.g., liquidity agreements or credit rating triggers associated with obligations to purchase assets of the structured entity or to provide financial support).

If, during the period of the financial statements, the investment entity or any of its unconsolidated controlled entities has, without having a contractual obligation to do so, provided financial or other support to an unconsolidated structured entity that the investment entity did not control, and if that provision of support has resulted in the investment entity controlling the structured entity, the investment entity must disclose an explanation of the relevant factors in reaching the decision to provide that support.

Interests in Joint Ventures and Associates

The entity must disclose information that enables users of its financial statements to evaluate:
(a) the nature, extent, and financial effects of its interests in joint ventures and associates, including the nature and effects of its contractual relationship with other investors who have joint control, or significant influence, over joint ventures and associates (see paragraphs 21 and 22); and (b) the nature of the risks associated with its interests in joint ventures and associates and changes in those risks (see paragraph 23).

Nature, extent, and financial effects of the entity’s interests in joint ventures and associates

The entity must disclose:
(a) for each joint venture and associate that is material to the reporting entity:
(i) the name of the joint venture or associate; (ii) the nature of the entity’s relationship with the joint venture or associate (describing, for example, the nature of the activities of the joint venture or associate and whether they are strategic to the activities of the entity); (iii) the location (and country of incorporation, if applicable and if different from the location) of the joint venture or associate; (iv) the proportion of ownership interests held by the entity or ownership interests held by other means (participating share) (contractual arrangements, for example) and, if different, the proportion of voting rights held (if applicable);

(b) for each joint venture and associate that is material to the reporting entity:
(i) whether the investment in the joint venture or associate is measured using the equity method or fair value; (ii) summarized financial information about the joint venture or associate, as specified in paragraphs B12 and B13; (iii) if the investment in the joint venture or associate is accounted for using the equity method, the fair value of the entity’s investment in the joint venture or associate, if there is a quoted market price for the investment; (c) financial information, as specified in paragraph B16, about the entity’s investments in joint ventures and associates that are not individually material:
(i) in aggregate for all joint ventures that are individually immaterial and separately; (ii) in aggregate for all associates that are individually immaterial.

21A. An investment entity is not required to provide the disclosures required by paragraphs 21(b) and 21(c).

The entity must also disclose:
(a) the nature and extent of any significant restrictions (for example, resulting from loan agreements, regulatory requirements, or contractual agreements between investors with joint control or significant influence over a joint venture or associate) on the ability of joint ventures or associates to transfer resources to the entity in the form of dividends or cash profits or to repay loans or advances made by the entity; (b) when the financial statements of the joint venture or associate, used in applying the equity method, are for a date or period different from that of the entity’s financial statements:
(i) the end date of the reporting period of the financial statements of that joint venture or associate; and (ii) the reason for using a different date or period;

(c) the entity’s share of unrecognized losses of the joint venture or associate, both for the reporting period and cumulatively, if the entity has ceased to recognize its share of losses of the joint venture or associate when applying the equity method.

Risks associated with the entity’s interests in joint ventures and associates

The entity must disclose:
(a) commitments related to its joint ventures, separately from the value of other commitments, as specified in paragraphs B18 to B20.
(b) in accordance with Technical Pronouncement CPC 25 – Provisions, Contingent Liabilities and Contingent Assets, unless the possibility of loss is remote, contingent liabilities incurred with respect to its interests in joint ventures or associates (including its share of contingent liabilities incurred jointly with other investors who have joint control or significant influence over joint ventures or associates), separately from the value of other contingent liabilities.

Interests in Unconsolidated Structured Entities

The entity must disclose information that enables users of its financial statements:
(a) to understand the nature and extent of its interests in unconsolidated structured entities (see paragraphs 26 to 28); and (b) to evaluate the nature of the risks associated with its interests in unconsolidated structured entities and changes in those risks (see paragraphs 29 to 31).
The information required by paragraph 24(b) includes information about the entity’s exposure to risk as a result of the involvement it had with unconsolidated structured entities in prior periods (for example, sponsoring a structured entity), even if, at the reporting date, the entity no longer has any contractual involvement with the structured entity.

25A. An investment entity is not required to provide the disclosures required by paragraph 24 for the unconsolidated structured entity it controls and for which it presents the disclosures required by paragraphs 19A to 19G.

Nature of Interests

The entity must disclose qualitative and quantitative information about its interests in unconsolidated structured entities, including, among other things, the nature, purpose, size, and activities of the structured entity and how the structured entity is financed.
If the entity has sponsored an unconsolidated structured entity for which it does not provide the information required by paragraph 29 (for example, because it does not have an interest in the entity at the reporting date), the entity must disclose:
(a) how it determined which structured entities it has sponsored; (b) the outcomes of those structured entities during the reporting period, including a description of the types of outcomes presented; and (c) the carrying amount (at the time of transfer) of all assets transferred to those structured entities during the reporting period.
The entity must present the information in paragraphs 27(b) and (c) in tabular format, unless another format is more appropriate, and must classify its sponsorship activities into relevant categories (see paragraphs B2 to B6).

Nature of Risks

The entity must disclose in tabular format, unless another format is more appropriate, a summary of the following:
(a) the carrying amounts of assets and liabilities recognized in its financial statements relating to its interests in unconsolidated structured entities; (b) the balance sheet line items in which those assets and liabilities are recognized; (c) the value that best represents the entity’s maximum exposure to loss arising from its interests in unconsolidated structured entities, including how the maximum exposure to loss is determined. If it cannot quantify its maximum exposure to loss arising from its interests in unconsolidated structured entities, the entity must disclose that fact and the reasons for doing so; (d) a comparison of the carrying amounts of the entity’s assets and liabilities that relate to its interests in unconsolidated structured entities and the entity’s maximum exposure to losses arising from those entities.
If during the reporting period the entity has, without having a contractual obligation to do so, provided financial or other support to an unconsolidated structured entity in which it previously had or currently has an interest (for example, purchasing assets from the structured entity or instruments issued by it), the entity must disclose:
(a) the type and value of support provided, including situations in which the entity has assisted the structured entity in obtaining financial support; and (b) the reasons for providing the support.
The entity must disclose any current intentions to provide financial or other support to an unconsolidated structured entity, including intentions to assist the structured entity in obtaining financial support.

Appendix A – Definition of Terms

This appendix is an integral part of this Pronouncement.

Outcome of a structured entity – For the purposes of this Pronouncement, outcome of a structured entity includes, among other things, recurring and non-recurring fees, interest, dividends, profit distributions, gains or losses on the remeasurement or derecognition of interests in structured entities, and gains or losses arising from the transfer of assets and liabilities to the structured entity.

Interest in another entity – For the purposes of this Pronouncement, interest in another entity refers to contractual and non-contractual involvement that exposes the entity to variability of returns from the performance of the other entity. Interest in another entity may be evidenced by, but is not limited to, holding equity or debt instruments, as well as other forms of involvement, such as providing funding resources, liquidity support, credit enhancement, and guarantees. This includes the means by which the entity has control or joint control of another entity or significant influence over it. The entity does not necessarily have an interest in another entity solely due to a typical customer/supplier relationship.

Paragraphs B7 to B9 provide additional information about interests in other entities.

Paragraphs B55 to B57 of Technical Pronouncement CPC 36 explain the variability of returns.

Structured entity – An entity that has been designed so that voting rights or similar are not the dominant factor in deciding who controls the entity, such as when any voting rights relate only to administrative tasks and the relevant activities are directed by means of contractual arrangements.

Paragraphs B22 to B24 provide additional information about structured entities.

The following terms are defined in Technical Pronouncement CPC 35, Technical Pronouncement CPC 18, Technical Pronouncement CPC 36, and Technical Pronouncement CPC 19 – Joint Arrangements and are used in this Pronouncement with the meanings specified in those documents:

associate
consolidated financial statements
control of an entity
equity method
economic group
investment entity
joint venture
joint control
joint operation
joint venture (joint venture)
non-controlling interests
parent
protective rights
relevant activities
separate financial statements
special purpose vehicle (SPV)
significant influence
subsidiary.

Appendix B – Application Guidance

This appendix is an integral part of the Pronouncement. It describes the application of paragraphs 1 to 31 and has the same authority as the other parts of the Pronouncement.

B1. The examples in this appendix depict hypothetical situations. Although some aspects of the examples may be present in real situations, all relevant facts and circumstances of a specific situation must be evaluated when applying this Pronouncement.

Aggregation (paragraph 4)

B2. The entity must decide, in light of the circumstances, the amount of detail it should provide to satisfy the information needs of users and the emphasis it should place on different aspects of the requirements and how to aggregate the information. It is necessary to strike a balance between overloading the financial statements with excessive detail, which may not assist users of financial statements, and omitting information as a result of excessive aggregation.

B3. The entity may aggregate the disclosures required by this Pronouncement for interests in similar entities if the aggregation is consistent with the disclosure objective and the requirement of paragraph B4 and does not hinder the understanding of the information provided. The entity must disclose how it aggregated its interests in similar entities.

B4. The entity must present information separately for interests in:
(a) subsidiaries;
(b) joint ventures;
(c) joint operations;
(d) associates; and
(e) unconsolidated structured entities.

B5. In determining whether to aggregate information, the entity must consider quantitative and qualitative information about the different risk and return characteristics of each entity whose aggregation it is considering and the significance of each of those entities to the reporting entity. The entity must present the disclosures in a manner that clearly explains to users of the financial statements the nature and extent of its interests in those other entities.

B6. Examples of levels of aggregation within the classes of entities defined in paragraph B4 that may be appropriate are:
(a) nature of activities (for example, research and development entity, revolving credit card securitization entity); (b) classification by sector; (c) geography (for example, country or region).

Interests in other entities

B7. Interest in another entity refers to contractual and non-contractual involvement that exposes the reporting entity to variability of returns from the performance of the other entity. Consideration of the purpose and structure of the other entity may help the reporting entity, when assessing whether it has an interest in that entity and, therefore, whether it is obligated to provide the disclosures of this Pronouncement. This assessment must include consideration of the risks that the other entity was designed to create and the risks that the other entity was designed to transfer to the reporting entity and other parties.

B8. The reporting entity is usually exposed to variability of returns from the performance of another entity by holding instruments (for example, equity or debt instruments issued by another entity) or by having other involvement that absorbs that variability. For example, suppose a structured entity holds a portfolio of loans. The structured entity obtains a credit default swap from another entity (the reporting entity) to protect itself from default on principal and interest payments on the loan. The reporting entity has involvement that exposes it to variability of returns from the performance of the structured entity because the credit default swap absorbs the variability of returns of the structured entity.

B9. Some instruments are designed to transfer risk from the reporting entity to another entity. These instruments create variability of returns for the other entity, but normally do not expose the reporting entity to variability of returns from the performance of another entity. For example, suppose a structured entity is formed to offer investment opportunities to investors who wish to have exposure to the credit risk of Entity Z (Entity Z is not related to any party involved in the agreement). The structured entity obtains resources by issuing to those investors credit-linked notes and uses the proceeds of that issuance to invest in a portfolio of risk-free financial assets. The structured entity obtains exposure to the credit risk of Entity Z by entering into a credit default swap (CDS) with the swap counterparty. The CDS transfers the credit risk of Entity Z to the structured entity in exchange for the rate paid by the swap counterparty. Investors in the structured entity receive a higher return that reflects both the return of the structured entity from its asset portfolio and the CDS rate. The swap counterparty has no involvement with the structured entity that exposes it to variability of returns from the performance of the structured entity, as the CDS transfers the variability to the structured entity, rather than absorbing the variability of returns of the structured entity.

Summarized financial information for subsidiaries, joint ventures, and associates (paragraphs 12 and 21)

B10. For each subsidiary that has non-controlling interests that are material to the reporting entity, the following must be disclosed:
(a) dividends or profits paid to non-controlling shareholders; (b) summarized financial information about the assets, liabilities, profits, losses, and cash flows of the subsidiary that enables users to understand the non-controlling interests’ interests in the activities and cash flows of the group. This information may include, among other things, current assets, non-current assets, current liabilities, non-current liabilities, revenue, profits, losses, and total comprehensive income.

B11. The summarized financial information required by paragraph B10(b) must be the values before intercompany eliminations.

B12. For each joint venture and associate that is material to the reporting entity, the following must be disclosed:

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL
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

(a) dividends or profit distributions received from the jointly controlled entity (joint venture) or the associate; (b) summarized financial information for the jointly controlled entity (joint venture) or the associate (see items B14 and B15), including, among others:
(i) current assets;
(ii) non-current assets;
(iii) current liabilities;
(iv) non-current liabilities;
(v) revenues;
(vi) profits and losses from continuing operations; (vii) profits and losses after tax from discontinued operations; (viii) other comprehensive income; (ix) total comprehensive income.

B13. In addition to the summarized financial information required by item B12, the entity must disclose, for each jointly controlled entity (joint venture) that is material to the reporting entity, the following:
(a) cash and cash equivalents included in item B12(b)(i); (b) current financial liabilities (excluding trade payables and other provisions) included in item B12(b)(iii); (c) non-current financial liabilities (excluding trade payables and other provisions) included in item B12(b)(iv); (d) depreciation and amortization; (e) interest income; (f) interest expense; (g) income tax expense or income.

B14. The summarized financial information, presented in accordance with items B12 and B13, must be the values included in the accounting statements, prepared in conformity with the Pronouncements, Interpretations and Guidance of CPC, of the jointly controlled entity (joint venture) or the associate (and not the entity's share of those values). If the entity accounts for its interest in the jointly controlled entity (joint venture) or the associate using the equity method:

(a) the values included in the accounting statements, prepared in conformity with the Pronouncements, Interpretations and Guidance of CPC, of the jointly controlled entity (joint venture) or the associate must be adjusted to reflect adjustments made by the entity when using the equity method, such as fair value adjustments made at the time of acquisition and adjustments to reflect differences in accounting policies; (b) the entity must provide a reconciliation of the summarized financial information presented with the carrying amount of its interest in the jointly controlled entity (joint venture) or the associate.

B15. The entity may present the summarized financial information required by items B12 and B13 based on the accounting statements of the jointly controlled entity (joint venture) or the associate if:
(a) the entity measures its interest in the jointly controlled entity (joint venture) or the associate at fair value in accordance with Technical Pronouncement CPC 18; and (b) the jointly controlled entity (joint venture) or the associate does not prepare accounting statements in conformity with the Pronouncements, Interpretations and Guidance of CPC, and preparing them on that basis is impracticable or entails excessive cost. In this case, the entity must disclose on what basis the summarized financial information was prepared.

B16. The entity must disclose, in aggregate, the carrying amount of its interests in all individually material jointly controlled entities (joint ventures) or associates that are accounted for using the equity method. The entity must also disclose, separately, the aggregate amount of its share of the following items relating to these jointly controlled entities (joint ventures) or these associates:
(a) profits and losses from continuing operations; (b) profits and losses after tax from discontinued operations; (c) other comprehensive income; (d) total comprehensive income.
The entity must provide the disclosures separately for jointly controlled entities (joint ventures) and associates.

B17. When the entity's interest in a subsidiary, jointly controlled entity (joint venture) or associate (or portion of its interest in a jointly controlled entity (joint venture) or associate) is classified (or included in a disposal group classified) as held for sale, in accordance with CPC 31, the entity is not required to disclose summarized financial information for that subsidiary, jointly controlled entity (joint venture) or associate, in accordance with items B10 to B16.

Commitments for jointly controlled entities (joint ventures) (item 23a)

B18. The entity must disclose the total commitments undertaken, but not recognized at the reporting date (including its share of commitments undertaken jointly with other investors who have joint control of a jointly controlled entity (joint venture)), relating to its interests in jointly controlled entities (joint ventures). Commitments are those that may give rise to a future outflow of cash or other resources.

B19. Unrecognized commitments that may give rise to a future outflow of cash or other resources include:
(a) unrecognized commitments to provide financial resources (funding) or resources as a result of, for example:
(i) formation or acquisition contracts of jointly controlled entities (joint ventures) (which, for example, require the entity to contribute resources over a specific period); (ii) capital-intensive projects conducted by jointly controlled entities (joint ventures); (iii) unconditional purchase obligations, comprising the acquisition of equipment, inventory or services that the entity is committed to acquire from a jointly controlled entity (joint venture) or on its behalf; (iv) unrecognized commitments to grant loans or other financial support to a jointly controlled entity (joint venture); (v) unrecognized commitments to contribute resources to a jointly controlled entity (joint venture), such as, for example, assets or services; (vi) other unrecognized and non-cancelable commitments relating to a jointly controlled entity (joint venture);

(b) unrecognized commitments to acquire the interest of another party (or portion of that interest) in a jointly controlled entity (joint venture) if a specific event occurs or does not occur in the future.

B20. The requirements and examples of items B18 and B19 illustrate some of the types of disclosure required by item 18 of Technical Pronouncement CPC 05 – Disclosure of Related Party Transactions.

Interest in unconsolidated structured entities (items 24 to 31) Structured entity

B21. A structured entity is an entity that has been designed in such a way that voting rights or similar are not the dominant factor in deciding who controls the entity, such as when any voting rights relate only to administrative tasks, and the relevant activities are directed through contractual agreements.

B22. The structured entity often has some or all of the following characteristics or attributes:
(a) restricted activities;
(b) restricted and well-defined object, such as, for example, effecting tax-efficient leasing, conducting research and development activities, providing a source of capital or financing to an entity or offering investment opportunities to investors by transferring to investors the risks and benefits associated with the assets of the structured entity; (c) insufficient equity to allow the structured entity to finance its activities without subordinate financial support; (d) financing in the form of multiple instruments contractually linked to investors that create concentrations of credit risk or other risks (tranches).

B23. Examples of entities that are considered structured entities include, among others:
(a) securitization vehicles;
(b) asset-backed financing;
(c) some investment funds.

B24. An entity that is controlled by voting rights is not a structured entity simply because, for example, it receives financial resources from third parties after its restructuring.

Nature of risks arising from interests in unconsolidated structured entities (items 29 to 31)

B25. In addition to the information required by items 29 to 31, the entity must disclose additional information that is necessary to achieve the disclosure objective of item 24(b).

B26. Examples of additional information that, depending on the circumstances, may be relevant for assessing the risks to which the entity is exposed when it has an interest in an unconsolidated structured entity include:
(a) the terms of the agreement that could require the entity to provide financial support to the unconsolidated structured entity (for example, liquidity agreements or credit rating triggers associated with obligations to purchase assets of the structured entity or to provide financial support), including:
(i) description of events or circumstances that may expose the reporting entity to a loss; (ii) whether there are any terms that limit the obligation; (iii) whether there are any other parties that provide financial support and, if so, how the obligation of the reporting entity ranks in relation to the obligations of the other parties; (b) losses incurred by the entity during the reporting period relating to its interests in unconsolidated structured entities; (c) the types of income that the entity received during the reporting period as a result of its interests in unconsolidated structured entities; (d) whether the entity is obligated to absorb losses of the unconsolidated structured entity before other parties, the maximum limit of those losses for the entity and (if relevant) the ranking and values of potential losses assumed by parties whose interests rank below the entity's interest in the unconsolidated structured entity; (e) information on any liquidity agreements, guarantees or other commitments with third parties that may affect the fair value or risk of the entity's interests in unconsolidated structured entities;

(f) any difficulties that the unconsolidated structured entity has experienced in financing its activities during the reporting period; (g) regarding the financing structure of the unconsolidated structured entity, the forms of financing (for example, short-term commercial papers or medium-term bonds) and their weighted average life. Such information may include an analysis of the maturity of assets and financing of an unconsolidated structured entity, if the structured entity has longer-term assets financed by shorter-term liabilities.

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