CVM Resolution No. 130 of June 3, 2022 — CVM — BR

SECURITY AND EXCHANGE COMMISSION OF BRAZIL
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CVM RESOLUTION NO. 130, OF JUNE 3, 2022
Approves the Consolidation of Technical Interpretation ICPC 21 of the Accounting Pronouncements Committee - CPC, which deals with foreign currency transactions and advances.

THE PRESIDENT OF THE SECURITY AND EXCHANGE COMMISSION OF BRAZIL - CVM makes public that the Board, in a meeting held on May 4, 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 becomes mandatory for publicly-held companies the Technical Interpretation ICPC 21, which deals with foreign currency transactions and advances, issued by the Accounting Pronouncements Committee - CPC, as consolidated in Annex "A" to this Resolution.

Art. 2. CVM Deliberation No. 786, of December 21, 2017, 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

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ANNEX "A"

ACCOUNTING PRONOUNCEMENTS COMMITTEE

TECHNICAL INTERPRETATION ICPC 21
FOREIGN CURRENCY TRANSACTIONS AND ADVANCES
Correlation to International Financial Reporting Interpretations Committee – IFRIC 22

Summary Item
REFERENCES
CONTEXT 1 – 3
SCOPE 4 – 6
ISSUE 7
CONSENSUS 8 – 9
Appendix A – Effective date and transition

References

CPC 00 – Conceptual Framework for Financial Reporting
CPC 02 – Effects of Changes in Foreign Exchange Rates and Translation of Financial Statements
CPC 23 – Accounting Policies, Changes in Accounting Estimates and Errors

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Context

Item 21 of CPC 02 – Effects of Changes in Foreign Exchange Rates and Translation of Financial Statements requires that the entity record the foreign currency transaction, upon initial recognition in its functional currency, applying to the amount in foreign currency the spot exchange rate between the functional currency and the foreign currency (exchange rate) on the date of the transaction. Item 22 of CPC 02 establishes that the date of the transaction is the date on which it qualifies, for the first time, for recognition in accordance with pronouncements, interpretations, and guidance.
When the entity pays or receives, in advance, consideration in foreign currency, it usually recognizes a non-monetary asset or a non-monetary liability (1) before recognizing the respective asset, expense, or revenue. The respective asset, expense, or revenue (or part thereof) is the amount recognized, applying the specific pronouncement, which results in the derecognition of the non-monetary asset or non-monetary liability resulting from the advance consideration.

(1) For example, item 106 of CPC 47 – Revenue from Contracts with Customers requires that if the customer pays consideration, or the entity has an unconditional right to the amount of consideration (i.e., receivable) before the entity transfers the good or service to the customer, it must present the contract as a contractual liability when the payment is made or the payment is due (whichever occurs first).

It was questioned how to determine the "date of the transaction," applying items 21 and 22 of CPC 02 to recognize revenue. The issue specifically addressed the circumstances in which the entity must recognize the non-monetary liability arising from advance receipt before recognizing the related revenues. In analyzing the issue, it was observed that advance receipt or payment in foreign currency is not limited to revenue transactions. Consequently, it was decided to clarify the date of the transaction, for the purpose of determining the exchange rate to be used in the initial recognition of the related asset, expense, or revenue, when the entity receives or pays in advance consideration in foreign currency.

Scope
4. This interpretation applies to a foreign currency transaction (or part thereof) when the entity recognizes the non-monetary asset or non-monetary liability resulting from advance payment or receipt, before the entity recognizes the related asset, expense, or revenue (or part thereof).

This interpretation shall not be applied when the entity measures the related asset, expense, or revenue upon initial recognition by:
(a) fair value; or
(b) fair value of the consideration paid or received on a date different from the date of initial recognition of the non-monetary asset or non-monetary liability resulting from the advance consideration (for example, measurement of goodwill that adopts, as a basis, CPC 15 – Business Combinations).
The entity is not required to apply this interpretation to:

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(a) income taxes; or
(b) insurance contracts (including reinsurance contracts) that it issues or reinsurance contracts that it retains.

Issue
7. This interpretation deals with how to determine the date of the transaction for the purpose of designating the exchange rate that must be used in the initial recognition of the respective asset, expense, or revenue (or part thereof) and in the derecognition of non-monetary asset or non-monetary liability, resulting from advance payment or receipt in foreign currency.

Consensus
8. When applying items 21 and 22 of CPC 02, the date of the transaction, for the purpose of determining the exchange rate that must be used in the initial recognition of the respective asset, expense, or revenue (or part thereof), is the date on which the entity initially recognizes the non-monetary asset or non-monetary liability resulting from advance payment or receipt.

If there are multiple advance payments or receipts, the entity must determine the date of the transaction for each advance payment or receipt.

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Appendix A – Effective date and transition
This appendix is an integral part of this interpretation and has the same authority as the other parts of the interpretation.

Effective date
A1. The effective date of this interpretation is given by the regulatory bodies that approve it. Notwithstanding, for full compliance with International Financial Reporting Standards (IFRS), the entity must apply this interpretation for annual periods beginning on or after January 1, 2018.

Transition
A2. Upon initial adoption, the entity must use this interpretation:
(a) by applying, retrospectively, CPC 23; or
(b) by applying, prospectively, to all assets, expenses, and revenues within the scope of this interpretation initially recognized on or after:
(i) the beginning of the period in which the entity first uses this interpretation; or (ii) the beginning of the previous reporting period presented as comparative information in the financial statements of the period in which the entity first uses this interpretation.

A3. The entity, which applies item A2(b), must, upon initial adoption, use this interpretation in the asset, expense, and revenue initially recognized on or after the beginning of the reporting period, in item A2(b)(i) or (ii), for which the entity has recognized a non-monetary asset or non-monetary liability, resulting from advance consideration, occurring before that date.

Lineage: No known changes