CVM Resolution No. 136 of June 15, 2022 — 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 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil - Tel.: (61) 3327-2030/2031 www.cvm.gov.br

CVM RESOLUTION NO. 136, OF JUNE 15, 2022
Ratifies Technical Pronouncement CPC 00(R2) of the Accounting Pronouncements Committee – CPC, which deals with the Conceptual Framework for Financial Reporting.

The PRESIDENT OF THE SECURITIES 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. The obligation for open companies to comply with Technical Pronouncement CPC 00(R2), which deals with the Conceptual Framework for Financial Reporting, issued by the Accounting Pronouncements Committee – CPC, as per Annex “A” to this Resolution, is hereby ratified.

Art. 2. CVM Deliberation No. 835, of December 10, 2019, 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

CVM RESOLUTION NO. 136, OF JUNE 15, 2022
ANNEX “A”
ACCOUNTING PRONOUNCEMENTS COMMITTEE
TECHNICAL PRONOUNCEMENT CPC 00 (R2)
CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING
Correlation to International Financial Reporting Standards – Conceptual Framework

SITUATION AND PURPOSE OF THE CONCEPTUAL FRAMEWORK SP1.1 – SP1.5
CHAPTER 1 – OBJECTIVE OF GENERAL PURPOSE FINANCIAL REPORTING
INTRODUCTION 1.1
OBJECTIVE, USEFULNESS AND LIMITATIONS OF GENERAL PURPOSE FINANCIAL REPORTING 1.2 – 1.11 INFORMATION ABOUT THE REPORTING ENTITY’S ECONOMIC RESOURCES, CLAIMS AGAINST THE REPORTING ENTITY AND CHANGES IN RESOURCES AND CLAIMS 1.12 Economic resources and claims 1.13 – 1.14 Changes in economic resources and claims 1.15 – 1.16 Financial performance reflected by accrual accounting 1.17 – 1.19 Financial performance reflected by past cash flows 1.20 Changes in economic resources and claims not resulting from financial performance 1.21 INFORMATION ABOUT THE USE OF ECONOMIC RESOURCES BY THE REPORTING ENTITY 1.22 – 1.23

CHAPTER 2 – QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION
INTRODUCTION 2.1 – 2.3
QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION 2.4 – 2.38 Fundamental qualitative characteristics 2.5 – 2.22 Enhancing qualitative characteristics 2.23 – 2.38 COST CONSTRAINT ON USEFUL FINANCIAL REPORTING 2.39 – 2.43

CHAPTER 3 – FINANCIAL STATEMENTS AND THE REPORTING ENTITY
FINANCIAL STATEMENTS 3.1 – 3.9
Objective and scope of financial statements 3.2 – 3.3 Reporting period 3.4 – 3.7

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Perspective adopted in financial statements 3.8 Going concern assumption 3.9 REPORTING ENTITY 3.10 – 3.18 Consolidated and non-consolidated financial statements 3.15 – 3.18

CHAPTER 4 – ELEMENTS OF FINANCIAL STATEMENTS
INTRODUCTION 4.1 – 4.2
DEFINITION OF AN ASSET 4.3 – 4.25
Right 4.6 – 4.13
Potential to produce economic benefits 4.14 – 4.18 Control 4.19 – 4.25 DEFINITION OF A LIABILITY 4.26 – 4.47 Obligation 4.28 – 4.35 Transfer of economic resource 4.36 – 4.41 Present obligation as a result of past events 4.42 – 4.47 ASSET AND LIABILITY 4.48 – 4.62 Unit of account 4.48 – 4.55 Executory contract 4.56 – 4.58 Essence of contractual right and contractual obligation 4.59 – 4.62 DEFINITION OF EQUITY 4.63 – 4.67 DEFINITION OF INCOME AND EXPENSE 4.68 – 4.72

CHAPTER 5 – RECOGNITION AND DE RECOGNITION
RECOGNITION PROCESS 5.1 – 5.5
RECOGNITION CRITERIA 5.6 – 5.25
Relevance 5.12 – 5.17
Faithful representation 5.18 – 5.25
DE RECOGNITION 5.26 – 5.33

CHAPTER 6 – MEASUREMENT
INTRODUCTION 6.1 – 6.3
MEASUREMENT BASES 6.4 – 6.22
Historical cost 6.4 – 6.9
Current value 6.10 – 6.22

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INFORMATION PROVIDED BY SPECIFIC MEASUREMENT BASES 6.23 – 6.42 Historical cost 6.24 – 6.31 Current value 6.32 – 6.42 FACTORS TO BE CONSIDERED WHEN SELECTING THE MEASUREMENT BASE 6.43 – 6.86 Relevance 6.49 – 6.57 Faithful representation 6.58 – 6.62 Enhancing qualitative characteristics and the cost constraint 6.63 – 6.76 Factors specific to initial measurement 6.77 – 6.82 More than one measurement base 6.83 – 6.86 MEASUREMENT OF EQUITY 6.87 – 6.90 CASH FLOW-BASED MEASUREMENT TECHNIQUES 6.91 – 6.95

CHAPTER 7 – PRESENTATION AND DISCLOSURE
PRESENTATION AND DISCLOSURE AS COMMUNICATION TOOLS 7.1 – 7.3 OBJECTIVES AND PRINCIPLES OF PRESENTATION AND DISCLOSURE 7.4 – 7.6 CLASSIFICATION 7.7 – 7.19 Classification of assets and liabilities 7.9 – 7.11 Classification of equity 7.12 – 7.13 Classification of income and expenses 7.14 – 7.19 AGGREGATION 7.20 – 7.22

CHAPTER 8 – CONCEPTS OF CAPITAL AND CAPITAL MAINTENANCE
CONCEPT OF CAPITAL 8.1 – 8.2
CONCEPTS OF CAPITAL MAINTENANCE AND DETERMINATION OF PROFIT 8.3 – 8.9 ADJUSTMENTS FOR CAPITAL MAINTENANCE 8.10
APPENDIX – DEFINITIONS OF TERMS

SITUATION AND PURPOSE OF THE CONCEPTUAL FRAMEWORK SP1.1 The Conceptual Framework for Financial Reporting (Conceptual Framework) describes the objective of, and the concepts for, general purpose financial reporting.
The purpose of this Conceptual Framework is:
(a) to assist the development of International Financial Reporting Standards (IFRS) so that they are based on consistent concepts;

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(b) to assist preparers of financial reports to develop consistent accounting policies when no pronouncement applies to a particular transaction or other event, or when the pronouncement allows a choice of accounting policy; and (c) to assist all parties to understand and interpret the Pronouncements.
The Accounting Pronouncements Committee (CPC), considering its objective of promoting and maintaining full convergence of accounting practices adopted in Brazil with International Financial Reporting Standards (IFRS) issued by the IASB, has decided since 2008 to adopt the Conceptual Framework for Financial Reporting issued by the IASB in the development of CPC Technical Pronouncements. This revised Conceptual Framework was issued by the IASB in March 2018.

SP1.2 This Conceptual Framework is not a pronouncement itself. Nothing in this Conceptual Framework overrides any pronouncement or any requirement in a pronouncement.

SP1.3 To achieve the objective of general purpose financial reporting, the IASB may sometimes specify requirements that diverge from aspects of this Conceptual Framework. If this is done, it will explain the divergence in the Basis for Conclusions in such a pronouncement.

SP1.4 This Conceptual Framework may be revised from time to time based on experience with its use. Revisions to this Conceptual Framework will not automatically lead to changes in the Pronouncements. Any decision to change a Pronouncement requires that due process be conducted to add a project to its agenda and develop the amendment to that pronouncement.

SP1.5 This Conceptual Framework contributes to the stated mission of the IFRS Foundation and the IASB, which is part of the IFRS Foundation. That mission is to develop pronouncements that bring transparency, accountability and efficiency to financial markets around the world. The work of the IASB serves the public interest by promoting confidence, growth and long-term financial stability in the world economy. This Conceptual Framework establishes the basis for pronouncements that:
(a) contribute to transparency by improving international comparability and the quality of financial information, allowing investors and other market participants to make informed economic decisions; (b) strengthen accountability by reducing the information gap between capital providers and those to whom they have entrusted their money. Pronouncements based on this Conceptual Framework provide the information necessary to hold management accountable. As a source of globally comparable information, these Pronouncements are also of vital importance to regulators around the world; (c) contribute to economic efficiency by helping investors identify opportunities and risks around the world, thus improving capital allocation. For businesses, the use of a single, reliable accounting language derived from Pronouncements based on this Conceptual Framework reduces the cost of capital and reduces international reporting costs.

CVM RESOLUTION NO. 136, OF JUNE 15, 2022

CHAPTER 1 – OBJECTIVE OF GENERAL PURPOSE FINANCIAL REPORTING
INTRODUCTION 1.1
OBJECTIVE, USEFULNESS AND LIMITATIONS OF GENERAL PURPOSE FINANCIAL REPORTING 1.2 – 1.11 INFORMATION ABOUT THE REPORTING ENTITY’S ECONOMIC RESOURCES, CLAIMS AGAINST THE REPORTING ENTITY AND CHANGES IN RESOURCES AND CLAIMS 1.12 Economic resources and claims 1.13 – 1.14 Changes in economic resources and claims 1.15 – 1.16 Financial performance reflected by accrual accounting 1.17 – 1.19 Financial performance reflected by past cash flows 1.20 Changes in economic resources and claims not resulting from financial performance 1.21 INFORMATION ABOUT THE USE OF ECONOMIC RESOURCES BY THE REPORTING ENTITY 1.22 – 1.23

Introduction
1.1 The objective of general purpose financial reporting forms the basis of this Conceptual Framework. Other aspects of this Conceptual Framework – the qualitative characteristics of useful financial information and the cost constraint on such information, the concept of a reporting entity, elements of financial statements, recognition and de recognition, measurement, presentation and disclosure – follow logically from the objective.

Objective, usefulness and limitations of general purpose financial reporting
1.2 The objective of general purpose financial reporting 1 is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. 2
These decisions involve decisions about:
(a) buying, selling or holding equity and debt instruments; (b) providing or settling loans and other forms of credit; or (c) exercising rights to vote or otherwise influence management’s actions that affect the use of the entity’s economic resources.

1 Throughout the Conceptual Framework, the terms “financial reports” and “financial reporting” refer to general purpose financial reports and general purpose financial reporting, unless specifically indicated otherwise.
2 Throughout the Conceptual Framework, the term “entity” refers to the reporting entity, unless specifically indicated otherwise.

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1.3 The decisions described in paragraph 1.2 depend on the returns that existing and potential investors, lenders and other creditors expect, for example, dividends, principal and interest payments or increases in market price. The expectations of investors, lenders and other creditors regarding returns depend on their assessment of the amount, timing and uncertainty (prospects) of future net cash inflows to the entity and their assessment of management’s stewardship of the entity’s economic resources. Existing and potential investors, lenders and other creditors need information to help them make these assessments.

1.4 To make the assessments described in paragraph 1.3, existing and potential investors, lenders and other creditors need information about:
(a) the economic resources of the entity, claims against the entity and changes in those resources and claims (see paragraphs 1.12–1.21); and (b) the efficiency and effectiveness of management and those charged with governance 3 in meeting their responsibilities for the use of the entity’s economic resources (see paragraphs 1.22 and 1.23).

1.5 Many existing and potential investors, lenders and other creditors cannot require the reporting entity to provide information directly to them. They must rely on general purpose financial reports for much of the financial information they need. Consequently, they are the primary users to whom general purpose financial reports are directed. 4

1.6 However, general purpose financial reports do not and cannot provide all the information that existing and potential investors, lenders and other creditors need. These users need to consider relevant information from other sources, such as general economic conditions and expectations, political events and the political environment, and industry and company prospects.

1.7 General purpose financial reports are not intended to present the value of the reporting entity, but provide information to assist existing and potential investors, lenders and other creditors in estimating the value of the reporting entity.

1.8 Individual primary users have different and possibly conflicting information needs and desires. In developing the Pronouncements, the aim is to provide a set of information that meets the needs of the largest number of primary users. However, focusing on ordinary information needs does not prevent the reporting entity from including additional information that is more useful to a specific subset of primary users.

1.9 Management of the reporting entity is also interested in financial information about the entity. However, management does not need to rely on general purpose financial reports because it can obtain the financial information it needs internally.

3 Throughout the Conceptual Framework, the term “management” refers to management and those charged with governance of the entity, unless specifically indicated otherwise.
4 Throughout the Conceptual Framework, the terms “primary users” and “users” refer to those existing and potential investors, lenders and other creditors who must rely on general purpose financial reports for much of the financial information they need.

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1.10 Other parties, such as regulators and the general public, who are not investors, lenders and other creditors, may also consider general purpose financial reports useful. However, these reports are not primarily directed to these other groups.

1.11 To a large extent, financial reports are based on estimates, judgments and models, rather than exact depictions. This Conceptual Framework establishes the concepts underlying those estimates, judgments and models. The concepts are the goal that financial report preparers strive to achieve. As with most goals, the vision of this Conceptual Framework of ideal financial reporting is unlikely to be achieved fully, at least not in the short term, because it takes time to understand, accept and implement new ways of analyzing transactions and other events. However, establishing a goal to be achieved is essential for financial reporting to evolve in a way that improves its usefulness.

Information about the reporting entity’s economic resources, claims against the entity and changes in resources and claims
1.12 General purpose financial reports provide information about the financial position of the reporting entity, which consists of information about the economic resources of the entity and claims against the reporting entity. Financial reports also provide information about the effects of transactions and other events that change the economic resources and claims of the reporting entity. Both types of information provide data useful for decisions about providing resources to the entity.

Economic resources and claims
1.13 Information about the nature and amounts of the economic resources and claims of the reporting entity can help users identify the entity’s financial strengths and weaknesses. This information can help users assess the entity’s liquidity and solvency, its need for additional financing and its ability to obtain that financing. This information can also help users assess management’s stewardship of the entity’s economic resources. Information about the priorities and settlement claims of existing claims helps users predict how future cash flows will be distributed among those who have claims against the reporting entity.

1.14 Different types of economic resources affect users’ assessment of the entity’s future cash flow prospects differently. Some future cash flows result directly from existing economic resources, such as accounts receivable. Other cash flows result from the use of various resources together to produce and market products or services to customers. Although these cash flows cannot be identified with individual economic resources (or claims), users of financial reports need to know the nature and value of the resources available for use in the reporting entity’s operations.

Changes in economic resources and claims

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL (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 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4º Andar, Brasília/DF – CEP: 70712-900 – Brasil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br

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1.15 Changes in the economic resources and claims of the reporting entity result from the financial performance of that entity (see paragraphs 1.17–1.20) and from other events or transactions, such as the issuance of debt instruments or equity instruments (see paragraph 1.21). To properly assess both the prospects for future net cash inflows to the reporting entity and management’s stewardship of the entity’s economic resources, users need to be able to identify these two types of changes.

1.16 Information about the financial performance of the reporting entity helps users to understand the return generated by the entity on its economic resources. Information about the return generated by the entity can help users to assess management’s stewardship of the entity’s economic resources. Information about the variation and components of that return is also important, especially in assessing the uncertainty of future cash flows. Information about the past financial performance of the reporting entity and about how management has discharged its stewardship responsibilities is generally useful in predicting the entity’s future returns on its economic resources.

Financial performance reflected by accrual accounting

1.17 Accrual accounting reflects the effects of transactions and other events and circumstances on the reporting entity’s economic resources and claims in the periods in which those effects occur, even if the resulting cash receipts and payments occur in a different period. This is important because information about the economic resources and claims of the reporting entity and changes in its economic resources and claims during the period provides a better basis for assessing the past and future performance of the entity than information solely about cash receipts and payments during that period.

1.18 Information about the financial performance of the reporting entity during the period, reflected by changes in its economic resources and claims, except those resulting from obtaining additional resources directly from investors and creditors (see paragraph 1.21), is useful in assessing the entity’s past and future ability to generate net cash inflows. This information indicates to what extent the reporting entity has increased its available economic resources and, thus, its ability to generate net cash inflows through its operations and, not, by obtaining additional resources directly from investors and creditors. Information about the financial performance of the reporting entity during the period can also help users to assess management’s stewardship of the entity’s economic resources.

1.19 Information about the financial performance of the reporting entity during the period can also indicate to what extent events such as changes in market prices or interest rates have increased or decreased the entity’s economic resources and claims, thereby affecting the entity’s ability to generate net cash inflows.

Financial performance reflected by past cash flows

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1.20 Information about the cash flows of the reporting entity during the period also assists users in assessing the entity’s ability to generate future net cash inflows and in assessing management’s stewardship of the entity’s economic resources. This information indicates how the reporting entity obtains and spends cash, including information about borrowing and repaying debt, cash dividends or other cash distributions to investors, and other factors that may affect the entity’s liquidity or solvency. Information about cash flows assists users in understanding the reporting entity’s operations, assessing its financing and investing activities, assessing its liquidity or solvency, and interpreting other information about financial performance.

Changes in economic resources and claims not resulting from financial performance

1.21 The economic resources and claims of the reporting entity can also be affected by reasons other than financial performance, such as the issuance of debt instruments or equity instruments. Information about this type of change is necessary to provide users with a full understanding of the reasons for the changes in the reporting entity’s economic resources and claims and of the implications of those changes for its future financial performance.

Information about the use of the entity’s economic resources

1.22 Information about the efficiency and effectiveness with which management has discharged its responsibilities for the use of the entity’s economic resources helps users to assess management’s stewardship of those resources. This information is also useful in predicting how efficiently and effectively management will use the entity’s economic resources in future periods. Therefore, it can be useful in assessing the entity’s prospects for future net cash inflows.

1.23 Examples of management’s responsibilities for the use of the entity’s economic resources include safeguarding those resources against adverse effects of economic factors, such as changes in prices and technology, and ensuring that the entity complies with applicable laws, regulations, and contractual provisions.

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CHAPTER 2 – QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION
INTRODUCTION 2.1 – 2.3
QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION 2.4 – 2.38 Fundamental qualitative characteristics 2.5 – 2.22 Relevance 2.6 – 2.10 Materiality 2.11 Faithful representation 2.12 – 2.19 Applying the fundamental qualitative characteristics 2.20 – 2.22 Enhancing qualitative characteristics 2.23 – 2.38 Comparability 2.24 – 2.29 Verifiability 2.30 – 2.32 Timeliness 2.33 Understandability 2.34 – 2.36 Applying the enhancing qualitative characteristics 2.37 – 2.38 THE COST CONSTRAINT ON USEFUL FINANCIAL REPORTING 2.39 – 2.43

Introduction

2.1 The qualitative characteristics of useful financial information discussed in this Chapter identify the types of information that tend to be most useful to existing and potential investors, lenders and other creditors for making decisions about the reporting entity based on information in its financial report (financial information).

2.2 Financial reports provide information about the economic resources of the reporting entity, claims against the reporting entity and the effects of transactions and other events and conditions that change those resources and claims. (This information is referred to in this Conceptual Framework as information about economic phenomena.) Some financial reports also include explanatory material about management’s expectations and strategies for the reporting entity and other types of prospective information.

2.3 The qualitative characteristics of useful financial information apply to financial information provided in financial statements as well as to financial information provided in other forms. Cost, which is a pervasive constraint on the ability of the reporting entity to provide useful financial information, applies in a similar way. However, the considerations when applying the qualitative characteristics and the cost constraint may be different for different types of information. For example, applying them to prospective information may be different from applying them to information about existing economic resources and claims and changes in those resources and claims.

Footnote 5: Throughout the Conceptual Framework, the terms “qualitative characteristics” and “cost constraint” refer to the qualitative characteristics of useful financial information and the cost constraints on that information.

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Qualitative characteristics of useful financial information

2.4 If financial information is to be useful, it must be relevant and faithfully represent what it purports to represent. The usefulness of financial information is enhanced if it is comparable, verifiable, timely and understandable.

Fundamental qualitative characteristics

2.5 The fundamental qualitative characteristics are relevance and faithful representation.

Relevance

2.6 Relevant financial information is capable of making a difference in the decisions made by users. Information may be capable of making a difference in a decision even if some users choose not to take advantage of it or have already obtained it from other sources.

2.7 Financial information is capable of making a difference in decisions if it has predictive value, confirmatory value, or both.

2.8 Financial information has predictive value if it can be used as input by users in their processes employed to predict future outcomes. Financial information need not be a prediction or a forecast to have predictive value. Financial information with predictive value is used by users in making their own predictions.

2.9 Financial information has confirmatory value if it provides feedback about (confirms or changes) previous evaluations.

2.10 The predictive value and confirmatory value of financial information are interrelated. Information that has predictive value often also has confirmatory value. For example, information about revenue for the current year, which can be used as a basis for predicting revenue in future years, can also be compared with predictions of revenue for the current year that were made in previous years. The results of those comparisons can help a user to correct and improve the processes that were used to make those previous predictions.

Materiality

2.11 Information is material if omitting it or misstating it could influence decisions that users make on the basis of financial information about a specific reporting entity. In other words, materiality is an aspect of relevance that depends on the nature or magnitude, or both, of the items to which the information relates in the context of an individual entity’s financial report. Consequently, it is not possible to specify a uniform quantitative threshold for materiality or to predetermine what can be material in a specific situation.

Faithful representation

2.12 Financial reports represent economic phenomena in words and numbers. For financial information to be useful, it must not only represent relevant phenomena, but it must also faithfully represent the phenomena that it purports to represent. In many circumstances, the essence of an economic phenomenon and its legal form are the same. If they are not the same, providing information only about the legal form would not faithfully represent the economic phenomenon (see paragraphs 4.59–4.62).

2.13 To be a perfectly faithful representation, a representation would have three characteristics. It would be complete, neutral and free from error. Obviously, perfection is never or rarely achieved. The objective is to maximise those qualities as much as possible.

2.14 Completeness includes all information necessary for a user to understand the phenomenon being represented, including all descriptions and explanations necessary. For example, a complete representation of a group of assets would include, at a minimum, a description of the nature of the assets in the group, a numerical representation of all the assets in the group and a description of what the numerical representation portrays (for example, historical cost or fair value). For some items, a complete representation might also involve explanations of significant facts about the quality and nature of the item, factors and circumstances that might affect its quality and nature and the process used to determine the numerical representation.

2.15 Neutrality is the absence of bias in the selection or presentation of financial information. A neutral representation is not slanted, not weighted towards likely desired outcomes and not emphasised, under-emphasised or otherwise manipulated to increase the probability that financial information will be received favourably or unfavourably by users. Neutral information does not mean information without purpose or without influence on behaviour. On the contrary, relevant financial information is, by definition, capable of making a difference in users’ decisions.

2.16 Neutrality is supported by the exercise of prudence. Prudence is the exercise of caution when making judgments under conditions of uncertainty. The exercise of prudence means that assets and income are not overstated and liabilities and expenses are not understated. Footnote 6 Similarly, the exercise of prudence does not permit the understatement of assets or income or the overstatement of liabilities or expenses. Such distorted disclosures can lead to the overstatement or understatement of income or expenses in future periods.

2.17 The exercise of prudence does not imply the need for asymmetry, for example, the need for systematically more convincing evidence to support the recognition of assets or income than the recognition of liabilities or expenses. That asymmetry is not a qualitative characteristic of useful financial information. Nevertheless, some pronouncements may contain asymmetric requirements if that is a consequence of decisions that are intended to select the information that is most relevant and that faithfully represents what it purports to represent.

Footnote 6: Assets, liabilities, income and expenses are defined in Table 4.1. They are the elements of financial statements.

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2.18 Faithful representation does not mean accurate in all respects. Free from error means there are no errors or omissions in the description of the phenomenon and that the process used to produce the information reported has been selected and applied with no errors in the process. In this context, free from error does not mean perfectly accurate in all respects. For example, an estimate of an unobservable price or value cannot be determined to be accurate or inaccurate. However, a representation of that estimate can be a faithful representation if the amount is described clearly and precisely as an estimate, the nature and limitations of the estimating process are explained and no error has been made in selecting and applying the appropriate process for developing the estimate.

2.19 When monetary amounts in financial reports cannot be observed directly and must instead be estimated, measurement uncertainty arises. The use of reasonable estimates is an essential part of the preparation of financial information and does not undermine the usefulness of the information if the estimates are described and explained clearly and precisely. Even a high degree of measurement uncertainty does not necessarily prevent an estimate from providing useful information (see paragraph 2.22).

Applying the fundamental qualitative characteristics

2.20 Information must be both relevant and provide a faithful representation of what it purports to represent in order to be useful. Neither a faithful representation of an irrelevant phenomenon nor an unfaithful representation of a relevant phenomenon helps users to make good decisions.

2.21 The most efficient and effective process for applying the fundamental qualitative characteristics is usually the following (noting the effects of enhancing characteristics and the cost constraint, which are not considered in this example). First, identify the economic phenomenon about information on what is capable of being useful to users of the financial information of the reporting entity. Second, identify the type of information about that phenomenon that is most relevant. Third, determine whether that information is available and whether it can provide a faithful representation of the economic phenomenon. If yes, the process for satisfying the fundamental qualitative characteristics ends at that point. If no, the process is repeated with the next most relevant type of information.

2.22 In some cases, a trade-off between the fundamental qualitative characteristics may need to be found to achieve the objective of financial reporting, which is to provide useful information about economic phenomena. For example, the most relevant information about a phenomenon might be a highly uncertain estimate. In some cases, the level of measurement uncertainty involved in making that estimate might be so high that it might be questionable whether the estimate would provide a sufficiently faithful representation of that phenomenon. In some of those cases, the most useful information might be the highly uncertain estimate, accompanied by a description of the estimate and an explanation of the uncertainties affecting it. In other cases, if that information does not provide a sufficiently faithful representation of that phenomenon,

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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 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4º Andar, Brasília/DF – CEP: 70712-900 – Brasil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br RESOLUÇÃO CVM Nº 136, DE 15 DE JUNHO DE 2022
2.30 Verifiability helps to assure users that information faithfully represents the economic phenomena it purports to represent. Verifiability means that different knowledgeable and independent observers can reach a consensus, although not necessarily complete agreement, that a specific representation is a faithful representation. Quantified information does not need to be a single value estimate to be verifiable. A range of possible values and the respective probabilities can also be verified.
2.31 Verification can be direct or indirect. Direct verification means verifying the value or other representation through direct observation, for example, by counting money. Indirect verification means verifying the input data of a model, formula, or other technique and recalculating the output data using the same methodology. An example is verifying the book value of inventory by checking the information (quantities and costs) and recalculating the ending inventory, using the same cost flow assumption (for example, using the first-in, first-out method).
2.32 Verifying some explanations and prospective financial information may be possible only in a future period, or may even not be possible. To assist users in deciding whether they wish to use this information, it would normally be necessary to disclose the underlying assumptions, the methods of compiling the information, and other factors and circumstances supporting the information.
Timeliness
2.33 Timeliness means making information available to decision-makers in time to enable them to influence their decisions. Generally, the older the information, the less useful it is. However, some information may continue to be timely for a long time after the end of the reporting period because, for example, some users may need to identify and evaluate trends.
Understandability
2.34 Classifying, characterizing, and presenting information in a clear and concise manner makes it understandable.
2.35 Some phenomena are inherently complex and it may not be possible to make their understanding easy. Excluding information about these phenomena from financial reports may make it easier to understand the information contained in those financial reports. However, those reports would be incomplete and, therefore, possibly distorted.
2.36 Financial reports are prepared for users who have reasonable knowledge of business and economic activities and who review and analyze the information diligently. Sometimes, even well-informed and diligent users may need to seek the assistance of a consultant to understand information about complex economic phenomena.
Application of qualitative enhancing characteristics
2.37 Qualitative enhancing characteristics should be maximized as much as possible. However, qualitative enhancing characteristics, whether individually or as a group, cannot make information useful if that information is irrelevant or does not provide a faithful representation of what it purports to represent.
2.38 The application of qualitative enhancing characteristics is an iterative process that does not follow a prescribed order. Sometimes, a qualitative enhancing characteristic may have to be reduced to maximize another qualitative enhancing characteristic. For example, the temporary reduction in comparability resulting from the prospective application of a new pronouncement may be advantageous to increase relevance or faithful representation in the long term. Appropriate disclosures can partially compensate for non-comparability.
Cost constraint on useful financial reporting
2.39 Cost is a pervasive constraint on the information that can be provided by financial reporting. The reporting of financial information imposes costs, and it is important that these costs are justified by the benefits of presenting that information. There are several types of costs and benefits to be considered.
2.40 Providers of financial information spend most of the effort involved in collecting, processing, verifying, and disseminating financial information, but ultimately, users bear these costs in the form of reduced returns. Users of financial information may also incur costs of analyzing and interpreting the information provided. If the necessary information is not provided, users incur additional costs to obtain that information elsewhere or to estimate it.
2.41 The presentation of financial information that is relevant and faithfully represents what it purports to represent helps users make decisions with greater confidence. This results in the more efficient functioning of capital markets and the lower cost of capital for the economy as a whole. The individual investor, lender, or other creditor also receives the benefits when making more informed decisions. However, general-purpose financial reports cannot provide all the information that each user believes to be relevant.
2.42 When applying the cost constraint, one must assess whether the benefits of reporting specific information are likely to justify the costs incurred to provide and use that information. When applying the cost constraint in the development of a proposed pronouncement, information is sought from providers of financial information, users, auditors, academics, and others regarding the nature and expected quantity of the benefits and costs of that pronouncement. In most situations, assessments are based on a combination of quantitative and qualitative information.
2.43 Due to inherent subjectivity, assessments by different individuals regarding the costs and benefits of presenting specific items of financial information vary. Therefore, it is sought to consider costs and benefits in relation to financial reporting as a whole, and not only in relation to individual reporting entities. This does not mean that cost and benefit assessments always justify the same reporting requirements for all entities. Differences may be appropriate due to the different sizes of entities, different forms of obtaining capital (public or private), different user needs, or other factors.

7 Throughout the Conceptual Framework, the term “financial statements” refers to general-purpose financial statements.
8 Assets, liabilities, equity, revenues, and expenses are defined in Table 4.1. They are elements of financial statements.
9 The Conceptual Framework does not specify whether the statement(s) of financial performance comprises(s) a single statement or two statements.

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 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4º Andar, Brasília/DF – CEP: 70712-900 – Brasil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br RESOLUÇÃO CVM Nº 136, DE 15 DE JUNHO DE 2022 (iv) contributions by holders of equity interests and distributions to them; and (v) the methods, assumptions, and judgments used in estimating the values presented or disclosed, and changes in those methods, assumptions, and judgments. Reporting period
3.4 Financial statements are prepared for a specific period of time (reporting period) and provide information about:
(a) assets and liabilities – including unrecognized assets and liabilities – and equity that existed at the end of the reporting period, or during the reporting period; and (b) revenues and expenses for the reporting period.
3.5 To help users of financial statements to identify and assess changes and trends, financial statements also provide comparative information from at least one prior reporting period.
3.6 Information about possible future transactions and other possible future events (prospective information) is included in financial statements if:
(a) it refers to assets or liabilities of the entity – including unrecognized assets or liabilities – or equity that existed at the end of the reporting period, or during the reporting period, or to revenues or expenses of the reporting period; and (b) it is useful to users of financial statements.
For example, if the asset or liability is measured by estimating future cash flows, information about those estimated future cash flows may help users of financial statements to understand the measurements presented. Financial statements normally do not provide other types of prospective information, for example, explanatory material about management's expectations and strategies for the reporting period.
3.7 Financial statements include information about transactions and other events that occurred after the end of the reporting period if the provision of that information is necessary to achieve the objective of financial statements (see item 3.2).
Perspective adopted in financial statements
3.8 Financial statements provide information about transactions and other events observed from the perspective of the reporting entity as a whole, and not from the perspective of any specific group of investors, lenders, and other creditors, existing or potential, of the entity.
Going concern assumption
3.9 Financial statements are normally prepared on the assumption that the reporting entity is a going concern and will continue in operation in the foreseeable future. Thus, it is assumed that the entity has no intention or need to enter into liquidation or cease trading. If there is such an intention or need, the financial statements may have to be prepared on a different basis. If so, the financial statements describe the basis used.
Reporting entity
3.10 The reporting entity is the entity that is required to, or decides, to prepare financial statements. The reporting entity may be a single entity or part of an entity or may comprise more than one entity. A reporting entity is not necessarily a legal entity.
3.11 Sometimes, the entity (parent) has control over another entity (subsidiary). If the reporting entity comprises both the parent and its subsidiaries, the reporting entity's financial statements are called “consolidated financial statements” (see items 3.15 and 3.16). If the reporting entity is only the parent, the reporting entity's financial statements are called “non-consolidated financial statements” (see items 3.17 and 3.18).
3.12 If the reporting entity comprises two or more entities that are not all linked by a parent-subsidiary relationship, the reporting entity's financial statements are called “combined financial statements.”
3.13 Determining the appropriate boundary of the reporting entity can be difficult if the reporting entity:
(a) is not a legal entity; and
(b) does not comprise only legal entities linked by a parent-subsidiary relationship.
3.14 In these cases, the determination of the reporting entity's boundary is guided by the information needs of the primary users of the reporting entity's financial statements. These users need relevant information that faithfully represents what it purports to represent. Faithful representation requires that:
(a) the boundary of the reporting entity does not contain an arbitrary or incomplete set of economic activities; (b) including that set of economic activities within the boundary of the reporting entity results in neutral information; and (c) a description is provided of how the boundary of the reporting entity was determined and what the reporting entity consists of. Consolidated and non-consolidated financial statements
3.15 Consolidated financial statements provide information about the assets, liabilities, equity, revenues, and expenses of both the parent and its subsidiaries as a single reporting entity. This information is useful to investors, lenders, and other creditors, existing and potential, of the parent in their assessment of the prospects for future net cash inflows to the parent. This is because the net cash inflows to the parent include distributions to the parent from its subsidiaries, and those distributions depend on net cash inflows to the subsidiaries.

COMMISSION OF SECURITIES AND EXCHANGE COMMISSION 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 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br CVM RESOLUTION NO. 136, OF JUNE 15, 2022

(e) obligations to issue a financial instrument if that financial instrument obligates the entity to transfer an economic resource.

4.40 Instead of satisfying the obligation to transfer an economic resource to the party that has the right to receive that resource, entities sometimes decide, for example:
(a) to settle the obligation by negotiating the release of the obligation; (b) to transfer the obligation to a third party; or (c) to replace that obligation to transfer an economic resource with another obligation by entering into a new transaction.

4.41 In the situations described in item 4.40, the entity has the obligation to transfer an economic resource until it has settled, transferred, or replaced that obligation.

Present obligation as a result of past events

4.42 The third criterion for a liability is that the obligation is a present obligation that exists as a result of past events.

4.43 A present obligation exists as a result of past events only if:
(a) the entity has already obtained economic benefits or taken an action; and (b) as a consequence, the entity will or may have to transfer an economic resource that it would not otherwise have to transfer.

4.44 The economic benefits obtained may include, for example, products or services. The action taken may include, for example, operating a certain business or operating in a certain market. If economic benefits are obtained, or the action is taken, over time, the resulting present obligation may accumulate over that time.

4.45 If new legislation is enacted, a present obligation arises only when, as a consequence of obtaining economic benefits or taking an action to which that legislation applies, the entity has or may have to transfer an economic resource that, otherwise, it would not have to transfer. The enactment of legislation is not, in itself, sufficient to attribute a present obligation to the entity. Similarly, usual practice, published policy, or a specific declaration of the entity of the type mentioned in item 4.31 results in a present obligation only when, as a consequence of obtaining economic benefits, or taking an action, to which that practice, policy, or declaration applies, the entity has or may have to transfer an economic resource that it would not otherwise have to transfer.

4.46 A present obligation may exist even if the transfer of economic resources cannot be executed until some time in the future. For example, a contractual liability to pay the cash value may exist currently even if the contract does not require payment until a future date. Similarly, the contractual obligation for the entity to perform work on a future date may exist currently even if the counterparty cannot require the entity to perform the work until that future date.

4.47 The entity does not yet have the present obligation to transfer an economic resource if it has not yet satisfied the criteria in item 4.43, that is, if it has not yet obtained economic benefits,

taken an action, that requires or may require the entity to transfer an economic resource that, otherwise, it would not have to transfer. For example, if the entity has entered into a contract to pay an employee a salary in exchange for the employee's services, the entity does not have the present obligation to pay the salary until it has received the services from the employee. Before that, the contract is executory – the entity has the combined right and obligation to exchange future salary for future services from the employee (see items 4.56 to 4.58).

Asset and liability

Unit of account

4.48 The unit of account is the right or group of rights, the obligation or group of obligations, or the group of rights and obligations, to which recognition criteria and measurement concepts apply.

4.49 A unit of account is selected for an asset or liability by considering how the recognition criteria and measurement concepts apply to that asset or liability and its related revenues and expenses. In some circumstances, it may be appropriate to select a unit of account for recognition and a different unit of account for measurement. For example, contracts may sometimes be recognized individually, but measured as part of a portfolio of contracts. For presentation and disclosure, assets, liabilities, revenues, and expenses may need to be aggregated or separated into components.

4.50 If the entity transfers part of an asset or part of a liability, the unit may change on that occasion, so that the transferred component and the retained component become separate units of account (see items 5.26 to 5.33).

4.51 A unit of account is selected to provide useful information, which implies that:
(a) the information provided about the asset or liability and about any related revenues and expenses must be relevant. Treating a group of rights and obligations as a single unit of account may provide more relevant information than treating each right or obligation as a separate unit of account if, for example, these rights and obligations:
(i) cannot be or are not likely to be the subject of separate transactions; (ii) cannot mature or are not likely to mature under different standards; (iii) have similar economic characteristics and risks, and thus are likely to have similar implications for the prospects of future net cash inflows to the entity or net cash outflows from the entity; or (iv) are used together in the business activities conducted by the entity to produce cash flows and are measured by reference to estimates of their interdependent future cash flows; (b) the information provided about the asset or liability and about any related revenues and expenses must faithfully represent the essence of the transaction or other event from which they resulted. Therefore, it may be necessary to treat rights or obligations arising from different sources as a single unit of account, or to separate rights or obligations arising from a single source (see item 4.62). Similarly, to provide a faithful representation of unrelated rights and obligations, it may be necessary to recognize and measure them separately.

4.52 Just as cost constrains other financial reporting decisions, it also constrains the selection of the unit of account. Therefore, when selecting a unit of account, it is important to consider whether it is likely that the benefits of the information provided to users of the financial statements by selecting that unit of account justify the costs of providing and using that information. Generally, the costs associated with the recognition and measurement of assets, liabilities, revenues, and expenses increase as the size of the unit of account decreases. Thus, generally, rights and obligations arising from the same source are separated only if the resulting information is more useful and the benefits outweigh the costs.

4.53 Sometimes, both rights and obligations arise from the same source. For example, some contracts establish both rights and obligations for each of the parties. If these rights and obligations are interdependent and cannot be separated, they constitute a single inseparable asset or liability and, thus, form a single unit of account. For example, this is the case for executory contracts (see item 4.57). On the other hand, if the rights are separable from the obligations, it may sometimes be appropriate to group the rights separately from the obligations, resulting in the identification of one or more separate assets and liabilities. In other cases, it may be more appropriate to group separable rights and obligations into a single unit of account, treating them as a single asset or a single liability.

4.54 Treating a set of rights and obligations as a single unit of account differs from offsetting assets and liabilities (see item 7.10).

4.55 Possible units of account include:
(a) an individual right or an individual obligation; (b) all rights, all obligations, or all rights and all obligations, arising from a single source, for example, a contract; (c) a subgroup of those rights and/or obligations – for example, a subgroup of rights on a fixed asset item for which the useful life and consumption pattern differ from those of other rights on that item; (d) a group of rights and/or obligations arising from a portfolio of similar items; (e) a group of rights and/or obligations arising from a portfolio of different items – for example, a portfolio of assets and liabilities to be disposed of in a single transaction; and (f) exposure to risk within a portfolio of items – if the portfolio of items is subject to common risk, some aspects of the accounting for that portfolio could focus on the aggregated exposure to that risk within the portfolio.

Executory contract

4.56 An executory contract is a contract, or part of a contract, that is equally unperformed – neither party has performed any of its obligations, or both parties have performed their obligations to an equal extent.

4.57 The executory contract establishes the combined right and obligation to exchange economic resources. The right and the obligation are interdependent and cannot be separated. Thus, the combined right and obligation constitute a single asset or liability. The entity has an asset if the terms of the exchange are currently favorable; it has a liability if the terms of the exchange are currently unfavorable. The inclusion of this asset or liability in the financial statements depends on both the recognition criteria (see Chapter 5) and the measurement basis (see Chapter 6) selected for the asset or liability, including, if applicable, any test to determine if the contract is onerous.

4.58 To the extent that any of the parties performs its obligations under the contract, the contract is no longer executory. If the reporting entity performs first according to the contract, that performance is the event that changes the right and obligation of the reporting entity to exchange economic resources for the right to receive an economic resource. That right is an asset. If the other party performs first, that performance is the event that changes the right and obligation of the reporting entity to exchange economic resources for the obligation to transfer an economic resource. That obligation is a liability.

Essence of contractual right and contractual obligation

4.59 The terms of a contract create rights and obligations for the entity that is a party to that contract. To faithfully represent these rights and obligations, the financial statements report their essence (see item 2.12). In some cases, the essence of the rights and obligations is clear based on the legal form of the contract. In other cases, the terms of the contract, group, or series of contracts require analysis to identify the essence of the rights and obligations.

4.60 All terms of the contract – whether implicit or explicit – must be considered, unless they have no substance. Implicit terms may include, for example, obligations imposed by law, such as legal warranty obligations imposed on entities that enter into contracts to sell products to customers.

4.61 Terms that have no substance are disregarded. A term has no substance if it has no discernible effect on the economics of the contract. Terms that have no substance may include, for example:
(a) terms that do not bind any of the parties; or (b) rights, including options, that the holder will not have the practical ability to exercise under any circumstances.

4.62 A group or series of contracts may obtain, or be intended to obtain, an overall commercial effect. To inform the substance of these contracts, it may be necessary to treat the rights and obligations arising from that group or series of contracts as a single unit of account. For example, if the rights or obligations in the contract simply invalidate all rights or obligations in another contract entered into at the same time with the same counterparty, the combined effect is that two contracts do not create rights or obligations. On the other hand, if a single contract creates two or more sets of rights or obligations that could have been created through two or more separate contracts, the entity may need to account for each set as if it resulted from separate contracts in order to faithfully represent the rights and obligations (see items 4.48 to 4.55).

Definition of equity

4.63 Equity is the residual interest in the assets of the entity after deducting all its liabilities.

4.64 Rights to equity are rights to the residual interest in the assets of the entity after deducting all its liabilities. In other words, they are claims against the entity that do not meet the definition of a liability. These claims may be established by contract, legislation, or similar means, and include, to the extent they do not meet the definition of a liability:
(a) shares of various types issued by the entity; and (b) some of the entity's obligations to issue another right to equity.

4.65 Different classes of rights to equity, such as ordinary shares and preferred shares, may confer on their holders different rights, for example, rights to receive all or part of the following items of equity:
(a) dividends, if the entity decides to pay dividends to eligible holders; (b) proceeds from the fulfillment of rights to equity, whether entirely upon liquidation, or partially on other occasions; or (c) other rights to equity.

4.66 Sometimes, legal, regulatory, or other requirements affect certain components of equity, such as share capital or retained earnings. For example, some of these requirements allow the entity to make distributions to holders of rights to equity only if the entity has sufficient reserves that these requirements specify as being distributable.

4.67 Business activities are often carried out by entities, such as sole proprietorships, partnerships, trusts, or various types of government entities. The legal and regulatory structures of these entities are often different from those applicable to corporations. For example, there may be few, if any, restrictions on distributions to holders of rights to equity against these entities. Nevertheless, the definition of equity in item 4.63 of this Conceptual Framework applies to all reporting entities.

Definition of revenue and expense

4.68 Revenues are increases in assets, or reductions in liabilities, that result in increases in equity, except those relating to contributions from holders of rights to equity.

4.69 Expenses are reductions in assets, or increases in liabilities, that result in reductions in equity, except those relating to distributions to holders of rights to equity.

4.70 It follows from these definitions of revenues and expenses that contributions from holders of rights to equity are not revenues, and distributions to holders of rights to equity are not expenses.

4.71 Revenues and expenses are the elements of financial statements that refer to the financial performance of the entity. Users of financial statements need information both about the financial position of the entity and its financial performance.

Thus, although revenues and expenses are defined in terms of changes in assets and liabilities, information about revenues and expenses is as important as information about assets and liabilities.

4.72 Different transactions and other events generate revenues and expenses with different characteristics. Providing separate information about revenues and expenses with different characteristics may help users of financial statements understand the financial performance of the entity (see items 7.14 to 7.19).

CHAPTER 5 – RECOGNITION AND DERECOGNITION
RECOGNITION PROCESS 5.1 – 5.5
RECOGNITION CRITERIA 5.6 – 5.25
Relevance 5.12 – 5.17
Uncertainty of existence 5.14
Low probability of inflow or outflow of economic benefits 5.15 – 5.17 Faithful representation 5.18 – 5.25 Uncertainty in measurement 5.19 – 5.23 Other factors 5.24 – 5.25 DERECOGNITION 5.26 – 5.33

Recognition process

5.1 Recognition is the process of capturing for inclusion in the balance sheet or in the income statement and the statement of comprehensive income an item that meets the definition of one of the elements of financial statements – asset, liability, equity, revenue, or expense. Recognition involves reflecting the item in one of these statements – either individually or together with other items – in words and through the monetary value, and including that value in one or more totals in that statement. The value by which an asset, liability, or equity is recognized in the balance sheet is referred to as its "carrying amount".

5.2 The balance sheet, income statement, and statement of comprehensive income reflect the asset, liability, equity, revenues, and expenses recognized by the entity in structured summaries that are intended to make the financial information comparable and understandable. An important characteristic of the structure of these summaries is that the values recognized in a statement are included in the totals and, if applicable, in the subtotals that link the items recognized in the statement.

5.3 Recognition links the elements, the balance sheet, and the income statement and statement of comprehensive income, as follows (see Diagram 5.1):
(a) in the balance sheet at the beginning and at the end of the reporting period, total assets less total liabilities equals total equity; and (b) changes recognized in equity during the reporting period comprise:
(i) revenues less expenses recognized in the income statement and the statement of comprehensive income; plus (ii) contributions from holders of rights to equity, less distributions to holders of rights to equity.

5.4 The statements are linked because the recognition of an item (or change in its carrying amount) requires the recognition or derecognition of one or more other items (or changes in the carrying amount of one or more other items). For example:

(a) revenue recognition occurs at the same time as:
(i) initial recognition of the asset, or increase in the carrying amount of the asset; or (ii) derecognition of the liability, or decrease in the carrying amount of the liability; (b) expense recognition occurs at the same time as:
(i) initial recognition of the liability, or increase in the carrying amount of the liability; or (ii) derecognition of the asset, or decrease in the carrying amount of the asset.

Diagram 5.1: How recognition links the elements of financial statements

Contributions by holders of equity instruments less Distributions to holders of equity instruments

Changes in equity

Balance sheet at the beginning of the reporting period Assets less liabilities equals equity

Balance sheet at the end of the reporting period Assets less liabilities equals equity

Statements of profit or loss and other comprehensive income Revenues less expenses

5.5 The initial recognition of assets or liabilities arising from transactions or other events may result in the simultaneous recognition of both revenues and the respective expenses. For example, the sale of goods for cash results in the recognition of revenue (from the recognition of the asset – cash) and expense (from the derecognition of another asset – goods sold). The simultaneous recognition of revenues and their respective expenses is sometimes referred to as the matching of costs and revenues. The application of the concepts in this Conceptual Framework leads to this matching when it results from the recognition of changes in assets and liabilities. However, the matching of costs and revenues is not an objective of this Conceptual Framework. This Conceptual Framework does not permit the recognition in the balance sheet of items that do not meet the definition of an asset, liability, or equity.

Recognition criteria

5.6 Only items that meet the definition of an asset, liability, or equity should be recognized in the balance sheet. Similarly, only items that meet the definition of revenues or expenses should be recognized in the statement of profit or loss and the statement of comprehensive income. However, not all items that meet the definition of one of these elements must be recognized.

5.7 Not recognizing an item that meets the definition of one of the elements makes the balance sheet, the statement of profit or loss, and the statement of comprehensive income less complete and may exclude useful information from the financial statements. On the other hand, in some circumstances, recognizing some items that meet the definition of one of the elements would not provide useful information. An asset or liability is recognized only if the recognition of that asset or liability and of any resulting revenues, expenses, or changes in equity provides users of the financial statements with information that is useful, namely:
(a) relevant information about the asset or liability and about any resulting revenues, expenses, or changes in equity (see paragraphs 5.12 to 5.17); and (b) a faithful representation of the asset or liability and of any resulting revenues, expenses, or changes in equity (see paragraphs 5.18 to 5.25).

5.8 Just as cost constrains other financial reporting decisions, it also constrains recognition decisions. There is a cost to recognize an asset or liability. Preparers of financial statements incur costs in obtaining relevant measurement of an asset or liability. Users of the financial statements also incur costs in analyzing and interpreting the information provided. An asset or liability should be recognized if it is likely that the benefits of the information provided to users of the financial statements by the recognition justify the costs of providing and using that information. In some cases, the costs of recognition may outweigh its benefits.

5.9 It is not possible to define precisely when the recognition of an asset or liability provides useful information to users of the financial statements at a cost that does not outweigh its benefits. What is useful to users depends on the item and the facts and circumstances. Consequently, judgment is required in deciding whether to recognize an item, and thus the recognition requirements may need to vary between and within pronouncements.

5.10 When making recognition decisions, it is important to consider the information that would be given if the asset or liability were not recognized. For example, if no asset is recognized when an expenditure is incurred, the expense must be recognized. Over time, the recognition of the expense may, in some cases, provide useful information, for example, information that allows users of the financial statements to identify trends.

5.11 Even if the item that meets the definition of an asset or liability is not recognized, the entity may need to provide information about that item in the notes. It is important to consider how to make that information sufficiently visible to compensate for the absence of the item from the structured summary provided by the balance sheet and, if applicable, by the statement of profit or loss and the statement of comprehensive income.

Relevance

5.12 Information about assets, liabilities, equity, revenues, and expenses is relevant to users of the financial statements. However, the recognition of a specific asset or liability and any resulting revenues, expenses, or changes in equity does not always provide relevant information. This may be the case if, for example:
(a) it is uncertain whether an asset or liability exists (see paragraph 5.14); or (b) an asset or liability exists, but the probability of inflow or outflow of economic benefits is low (see paragraphs 5.15 to 5.17).

5.13 The presence of one or both of the factors described in paragraph 5.12 does not automatically lead to the conclusion that the information provided by recognition lacks relevance. Moreover, factors other than those described in paragraph 5.12 may also affect the conclusion. It may be a combination of factors, and not any single factor, that determines whether recognition provides relevant information.

Uncertainty of existence

5.14 Paragraphs 4.13 and 4.35 discuss cases in which it is uncertain whether an asset or liability exists. In some cases, this uncertainty, possibly combined with the low probability of inflows or outflows of economic benefits and an exceptionally wide range of possible outcomes, may mean that the recognition of the asset or liability, necessarily measured at a single value, would not provide relevant information. Whether the asset or liability is recognized or not, explanatory information about the uncertainties associated with it may need to be provided in the financial statements.

Low probability of inflow or outflow of economic benefits

5.15 An asset or liability may exist even if the probability of inflow or outflow of economic benefits is low (see paragraphs 4.15 and 4.38).

5.16 If the probability of inflow or outflow of economic benefits is low, the most relevant information about the asset or liability may be information about the magnitude of the possible inflows or outflows, their possible timing, and the factors affecting the probability of their occurrence. The typical location for this information is in the notes.

5.17 Even if the probability of inflow or outflow of economic benefits is low, the recognition of the asset or liability may provide relevant information in addition to the information described in paragraph 5.16. If this is the case, it may depend on a variety of factors. For example:
(a) if the asset is acquired or the liability is incurred in a transaction at market terms, its cost generally reflects the probability of inflow or outflow of economic benefits. Thus, this cost may be relevant information, and is generally immediately available. Furthermore, not recognizing the asset or liability would result in the recognition of expenses or revenues at the time of the exchange, which might not be a faithful representation of the transaction (see paragraph 5.25(a)); (b) if the asset or liability results from an event other than an exchange transaction, the recognition of the asset or liability normally results in the recognition of revenues or expenses. If there is only a low probability that the asset or liability will result in an inflow or outflow of economic benefits, users of the financial statements might not consider

that the recognition of the asset and revenue, or the liability and expense, provides relevant information.

Faithful representation

5.18 The recognition of a specific asset or liability is appropriate if it provides not only relevant information, but also a faithful representation of that asset or liability and of any resulting revenues, expenses, or changes in equity. The possibility of faithful representation being provided may be affected by the level of uncertainty in measurement associated with the asset or liability or by other factors.

Uncertainty in measurement

5.19 For an asset or liability to be recognized, it must be measured. In many cases, these measurements must be estimated and are therefore subject to measurement uncertainty. As noted in paragraph 2.19, the use of reasonable estimates is an essential part of preparing financial information and does not detract from the usefulness of the information if the estimates are described and explained clearly and accurately. Even a high level of measurement uncertainty does not necessarily prevent that estimate from providing useful information.

5.20 In some cases, the level of uncertainty involved in estimating the measurement of an asset or liability may be so high that it may be questionable whether the estimate would provide a sufficiently faithful representation of that asset or liability and of any resulting revenues, expenses, or changes in equity. The level of measurement uncertainty may be very high if, for example, the only way to estimate the measurement of that asset or liability is by using measurement techniques based on cash flows, and in addition, one or more of the following circumstances exist:
(a) the range of possible outcomes is exceptionally wide and the probability of each outcome is exceptionally difficult to estimate; (b) the measurement is exceptionally sensitive to small changes in estimates of the probability of different outcomes – for example, if the probability of future cash inflows or cash outflows is exceptionally low, but the magnitude of those cash inflows or cash outflows will be exceptionally high if they occur; (c) measuring the asset or liability requires exceptionally difficult or exceptionally subjective allocations of cash flows that do not relate exclusively to the asset or liability being measured.

5.21 In some of the cases described in paragraph 5.20, the most useful information may be the measurement based on the highly uncertain estimate, accompanied by the description of the estimate and the explanation of the uncertainties affecting it. This is more likely to happen if that measurement is the most relevant for the asset or liability. In other cases, if that information does not provide a sufficiently faithful representation of the asset or liability and of any resulting revenues, expenses, or changes in equity, the most useful information may be a different measurement (accompanied by any necessary descriptions and explanations) that is slightly less relevant but is subject to less measurement uncertainty.

5.22 In limited circumstances, all relevant measurements of an asset or liability that are available (or can be obtained) may be subject to this high measurement uncertainty such that none would provide useful information about the asset or liability (and any resulting revenues, expenses, or changes in equity), even if the measurement were accompanied by a description of the estimates made in arriving at it and an explanation of the uncertainties affecting those estimates. In these limited circumstances, the asset or liability should not be recognized.

5.23 Whether the asset or liability is recognized or not, the faithful representation of the asset or liability may need to include explanatory information about the uncertainties associated with the existence or measurement of the asset or liability, or its outcome – the amount or timing of any inflow or outflow of economic benefits that will result from it (see paragraphs 6.60 to 6.62).

Other factors

5.24 The faithful representation of recognized assets, liabilities, equity, revenues, or expenses involves not only the recognition of that item, but also its measurement, as well as the presentation and disclosure of information about it (see Chapters 6 and 7).

5.25 Thus, when assessing whether the recognition of an asset or liability can provide a faithful representation of the asset or liability, it is necessary to consider not only its description and measurement in the balance sheet, but also:
(a) the representation of the resulting revenues, expenses, and changes in equity. For example, if the entity acquires an asset in exchange for consideration, not recognizing the asset would result in recognizing expenses and would reduce the entity’s profit and equity. In some cases, for example, if the entity does not consume the asset immediately, this result could provide a misleading representation that the entity’s financial position has deteriorated; (b) whether the respective assets and liabilities are recognized. If they are not recognized, recognition may create a recognition mismatch (accounting mismatch). This may not provide a faithful or understandable representation of the overall effect of the transaction or other event that results in the asset or liability, even if explanatory information is provided in the notes; (c) the presentation and disclosure of information about the asset or liability, and the resulting revenues, expenses, or changes in equity. Complete representation includes all information necessary for the user of the financial statements to understand the economic phenomenon portrayed, including all necessary descriptions and explanations. Thus, the presentation and disclosure of related information may allow the recognized value to become part of the faithful representation of the asset, liability, equity, revenues, or expenses.

Derecognition

5.26 Derecognition is the removal of part or all of a recognized asset or liability from the entity’s balance sheet. Derecognition normally occurs when that item no longer meets the definition of an asset or liability:
(a) for an asset, derecognition normally occurs when the entity loses control of all or part of the recognized asset; and (b) for a liability, derecognition normally occurs when the entity no longer has a present obligation for all or part of the recognized liability.

5.27 The accounting requirements for derecognition aim to faithfully represent both:
(a) any assets and liabilities retained after the transaction or other event that led to derecognition (including any asset or liability acquired, incurred, or created as part of the transaction or other event); and (b) the change in the entity’s assets and liabilities as a result of that transaction or other event.

5.28 The objectives described in paragraph 5.27 are normally achieved:
(a) by derecognizing any assets or liabilities that have expired or been consumed, received, executed, or transferred, and recognizing any resulting revenues or expenses. In the remainder of this Chapter, the term “component transferred” refers to all these assets and liabilities; (b) by continuing to recognize any retained assets or liabilities, referred to as the “component retained,” if any. This retained component becomes a separate unit of account from the transferred component. In this way, no revenue or expense should be recognized in the retained component as a result of the derecognition of the transferred component, unless the recognition results in a change in the measurement requirements applicable to the retained component; and (c) by applying one or more of the following procedures, if necessary to achieve one or both of the objectives described in paragraph 5.27:
(i) present any retained component separately in the balance sheet; (ii) present separately in the statement of profit or loss and the statement of comprehensive income any revenues or expenses recognized as a result of the derecognition of the transferred component; or (iii) provide explanatory information.

5.29 In some cases, an entity may appear to transfer an asset or liability, but that asset or liability may nevertheless remain an asset or liability of the entity. For example:
(a) if the entity has apparently transferred the asset, but retains exposure to significant positive or negative variations in the value of the economic benefits that can be produced by the asset, this sometimes indicates that the entity may continue to control that asset (see paragraph 4.24); or (b) if the entity has transferred the asset to another party that holds the asset as an agent of the entity, the transferor still controls the asset (see paragraph 4.25).

5.30 In the cases described in paragraph 5.29, derecognition of that asset or liability is not appropriate because it would not achieve either of the two objectives described in paragraph 5.27.

5.31 When the entity no longer has the transferred component, derecognition of the transferred component faithfully represents that fact. However, in some cases, derecognition may not faithfully represent how the transaction or other event changed the entity’s assets or liabilities, even when supported by one or more of the procedures described in paragraph 5.28(c). In these cases, derecognition of the transferred component may imply that the entity’s financial position has changed more significantly than indicated. This may occur, for example:
(a) if the entity has transferred the asset and, at the same time, entered into another transaction that results in a present right or present obligation to reacquire the asset. These present rights or

SECURITIES AND EXCHANGES 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 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br CVM RESOLUTION NO. 136, OF JUNE 15, 2022 present obligations may result, for example, from a forward contract, a written put option, or a purchased call option; (b) if the entity has retained exposure to significant positive or negative variations in the value of the economic benefits that can be produced by the transferred component that the entity no longer controls.
5.32 If derecognition is not sufficient to achieve the two objectives described in item 5.27, even when supported by one or more of the procedures described in item 5.28(c), these two objectives can sometimes be achieved by continuing to recognize the transferred component. This has the following consequences:
(a) no revenue or expense should be recognized in the retained component or the transferred component as a result of the transaction or other event; (b) the proceeds received (or paid) upon transfer of the asset (or liability) should be treated as a loan received (or granted); and (c) separate presentation of the transferred component in the balance sheet, or provision of explanatory information, is necessary to reflect the fact that the entity no longer has any rights or obligations arising from the transferred component. Similarly, it may be necessary to provide information about revenues or expenses arising from the transferred component after the transfer.
5.33 A case in which derecognition issues arise is when the contract is modified in such a way that it reduces or eliminates existing rights or obligations. When deciding how to account for contract modifications, it is necessary to consider which measurement unit provides users of financial statements with more useful information about the assets and liabilities held after the modification, and about how the modification changed the entity's assets and liabilities:
(a) if the contract modification only eliminates existing rights or obligations, the discussion in items 5.26 to 5.32 is considered when deciding whether these rights or obligations should be derecognized; (b) if the contract modification only adds new rights or obligations, it is necessary to decide whether the added rights or obligations should be treated as a separate asset or liability, or as part of the same measurement unit as the existing rights and obligations (see items 4.48 to 4.55); and (c) if the contract modification both eliminates existing rights or obligations and adds new rights or obligations, it is necessary to consider both the separate effect and the combined effect of these modifications. In some of these cases, the contract has been modified in such a way that, essentially, the modification replaces the old asset or liability with a new asset or liability. In cases of such extensive modification, the entity may need to derecognize the original asset or liability and recognize the new asset or liability.

SECURITIES AND EXCHANGES 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 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br CVM RESOLUTION NO. 136, OF JUNE 15, 2022
6.1 The elements recognized in the financial statements are quantified in monetary terms. This requires the selection of a measurement base. The measurement base is an identified characteristic – for example, historical cost, fair value, or fulfillment value – of the item being measured. Applying the measurement base to an asset or liability creates a measurement for that asset or liability and for the respective revenues and expenses.
6.2 It is likely that considering the qualitative characteristics of useful financial information and the cost constraint will result in the selection of different measurement bases for different assets, liabilities, revenues, and expenses.
6.3 A pronouncement may need to describe how to implement the measurement base selected in this pronouncement. This description may include:
(a) specifying techniques that may or must be used to estimate the measurement, applying a specific measurement base; (b) specifying a simplified measurement approach that is likely to provide information similar to that provided by the preferred measurement base; or (c) explaining how to modify the measurement base, for example, by excluding from the fulfillment value of a liability the effect of the possibility that the entity may fail to fulfill that liability (own credit risk). Measurement bases Historical cost
6.4 Measurement at historical cost provides monetary information about assets, liabilities, and their respective revenues and expenses, using information derived, at least in part, from the price of the transaction or other event that gave rise to them. Unlike current value, historical cost does not reflect changes in values, except to the extent that these changes refer to the reduction in recoverable amount of an asset or liability that becomes onerous (see items 6.7(c) and 6.8(b)).
6.5 The historical cost of an asset when it is acquired or created is the value of the costs incurred in acquiring or creating the asset, comprising the consideration paid to acquire or create the asset plus transaction costs. The historical cost of a liability when it is incurred or assumed is the value of the consideration received to incur or assume the liability minus transaction costs.
6.6 When the asset is acquired or created, or the liability is incurred or assumed, as a result of an event that is not a transaction in market terms (see item 6.80), it may not be possible to identify the cost, or the cost may not provide relevant information about the asset or liability. In some of these cases, the current value of the asset or liability is used as the assigned cost in initial recognition, and this assigned cost is then used as the starting point for subsequent measurement at historical cost.
6.7 The historical cost of an asset is updated over time to reflect, if applicable:
(a) the consumption of the entire or part of the economic resource that constitutes the asset (depreciation or amortization); (b) payments received that extinguish the entire or part of the asset;

SECURITIES AND EXCHANGES 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 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br CVM RESOLUTION NO. 136, OF JUNE 15, 2022 (c) the effect of events that cause the entire or part of the historical cost of the asset to no longer be recoverable (reduction in recoverable amount); and (d) accrual of interest to reflect any financing component of the asset.
6.8 The historical cost of a liability is updated over time to reflect, if applicable:
(a) the fulfillment of the entire or part of the liability, for example, by making payments that extinguish the entire or part of the liability or satisfying the obligation to deliver products; (b) the effect of events that increase the value of the obligation to transfer the economic resources necessary to fulfill the obligation to such an extent that the liability becomes onerous. A liability is onerous if the historical cost is no longer sufficient to reflect the obligation to satisfy the liability; and (c) accrual of interest to reflect any financing component of the liability.
6.9 A way to apply the measurement base at historical cost to financial assets and financial liabilities is to measure them at amortized cost. The amortized cost of a financial asset or financial liability reflects estimates of future cash flows, discounted at a rate determined at initial recognition. For variable rate instruments, the discount rate is updated to reflect changes in the variable rate. The amortized cost of a financial asset or financial liability is updated over time to reflect subsequent changes, such as accrual of interest, reduction in recoverable amount of financial asset, and receipts or payments.
Current value
6.10 Current value measurements provide monetary information about assets, liabilities, and their respective revenues and expenses, using updated information to reflect conditions at the measurement date. Due to updating, the current values of assets and liabilities reflect changes, since the previous measurement date, in estimates of cash flows and other factors reflected in these current values (see items 6.14, 6.15, and 6.20). Unlike historical cost, the current value of an asset or liability does not result, even in part, from the price of the transaction or other event that gave rise to the asset or liability.
6.11 The current value measurement bases include:
(a) fair value (see items 6.12 to 6.16);
(b) value in use of assets and fulfillment value of liabilities (see items 6.17 to 6.20); and (c) current cost (see items 6.21 and 6.22).
Fair value
6.12 Fair value is the price that would be received to sell an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date.
6.13 Fair value reflects the perspective of market participants – participants in a market to which the entity has access. The asset or liability is measured using the same assumptions that market participants would use when pricing the asset or liability if those market participants act in their best economic interest.

SECURITIES AND EXCHANGES 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 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br CVM RESOLUTION NO. 136, OF JUNE 15, 2022
6.14 In some cases, fair value can be determined directly by observing prices in an active market. In other cases, fair value is determined indirectly using measurement techniques, for example, cash flow-based (see items 6.91 to 6.95), reflecting all of the following factors:
(a) estimates of future cash flows;
(b) possible variations in the estimated amount or timing of future cash flows of the asset or liability being measured, caused by the uncertainty inherent in the cash flows; (c) the time value of money; (d) the price to bear the uncertainty inherent in the cash flows (risk premium or risk discount). The price to bear this uncertainty depends on the measure of this uncertainty. It also reflects the fact that investors generally would pay less for the asset (and generally require more to assume a liability) that has uncertain cash flows than for the asset (or liability) whose cash flows are certain; (e) other factors, for example, liquidity, if market participants would take these factors into consideration in the circumstances.
6.15 The factors mentioned in item 6.14(b) and (d) include the possibility that the counterparty may fail to fulfill its obligation to the entity (credit risk), or that the entity may fail to fulfill its obligation (own credit risk).
6.16 Since fair value is not derived, even in part, from the price of the transaction or other event that gave rise to the asset or liability, fair value is not increased by the transaction costs incurred in acquiring the asset and is not decreased by the transaction costs incurred when the liability is incurred or assumed. Furthermore, fair value does not reflect the transaction costs that would be incurred in the final disposal of the asset or in the transfer or settlement of the liability.
Value in use and fulfillment value
6.17 Value in use is the present value of the cash flows, or other economic benefits, that the entity expects to obtain from the use of an asset and its final disposal. Fulfillment value is the present value of the cash, or other economic resources, that the entity expects to be obliged to transfer to fulfill the obligation. These cash values or other economic resources include not only the values to be transferred to the counterparty of the liability, but also the values that the entity expects to be obliged to transfer to other parties in order to allow it to fulfill the obligation.
6.18 Since value in use and fulfillment value are based on future cash flows, they do not include transaction costs incurred in acquiring the asset or assuming the liability. However, value in use and fulfillment value include the present value of any transaction costs that the entity expects to incur in the final disposal of the asset or in the fulfillment of the liability.
6.19 Value in use and fulfillment value reflect entity-specific assumptions rather than market participant assumptions. In practice, there may sometimes be little difference between the assumptions that market participants would use and those that the entity itself uses.
6.20 Value in use and fulfillment value cannot be observed directly and are determined using cash flow-based measurement techniques (see items 6.91 to

SECURITIES AND EXCHANGES 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 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br CVM RESOLUTION NO. 136, OF JUNE 15, 2022 6.95). Value in use and fulfillment value reflect the same factors described for fair value in item 6.14, but from the entity-specific perspective, and not from the perspective of market participants. Current cost
6.21 The current cost of an asset is the cost of an equivalent asset at the measurement date, comprising the consideration that would be paid at the measurement date plus the transaction costs that would be incurred on that date. The current cost of a liability is the consideration that would be received for the equivalent liability at the measurement date minus the transaction costs that would be incurred on that date. Current cost, like historical cost, is an entry value: it reflects prices in the market in which the entity would acquire the asset or incur the liability. Thus, it is different from fair value, value in use, and fulfillment value, which are exit values. However, unlike historical cost, current cost reflects conditions at the measurement date.
6.22 In some cases, current cost cannot be determined directly by observing prices in an active market and must be determined indirectly by other means. For example, if prices are available only for new assets, the current cost of a used asset may need to be estimated by adjusting the current price of a new asset to reflect the current age and condition of the asset held by the entity.
Information provided by specific measurement bases
6.23 When selecting a measurement base, it is important to consider the nature of the information that the measurement base will produce both in the balance sheet and in the income statement and the statement of comprehensive income. Table 6.1 summarizes this information and items 6.24 to 6.42 provide additional discussion.
Historical cost
6.24 The information provided by measuring an asset or liability at historical cost may be relevant to users of financial statements, because historical cost uses information derived, at least in part, from the price of the transaction or other event that gave rise to the asset or liability.
6.25 Normally, if the entity acquired the asset in a recent market transaction, the entity expects that the asset will provide sufficient economic benefits for the entity to at least recover the cost of the asset. Similarly, if the liability was incurred or assumed as a result of a recent market transaction, the entity expects that the value of the obligation to transfer economic resources to satisfy the obligation will normally not be greater than the value of the consideration received minus the transaction costs. Thus, measuring the asset or liability at historical cost in these cases provides relevant information both about the asset or liability and about the price of the transaction that gave rise to that asset or liability.
6.26 Since historical cost is reduced to reflect the consumption of the asset and its reduction in recoverable amount, the value expected to be recovered from the asset measured at historical cost is at least as large as its carrying amount. Similarly, since the historical cost of the liability

SECURITIES AND EXCHANGES 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 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br CVM RESOLUTION NO. 136, OF JUNE 15, 2022 is increased when it becomes onerous, the value of the obligation to transfer the economic resources necessary to satisfy the obligation is not greater than the carrying amount of the liability.
6.27 If a non-financial asset is measured at historical cost, the consumption or sale of the asset, or part of the asset, gives rise to an expense measured at the historical cost of the asset, or part of the asset, consumed or sold.
6.28 The expense resulting from the sale of an asset must be recognized at the same time that the consideration for that sale must be recognized as revenue. The difference between revenue and expense is the margin resulting from the sale. Expenses arising from the consumption of the asset can be compared to the corresponding revenue to provide information on margins.
6.29 Similarly, if a non-financial liability was incurred or assumed in exchange for consideration and is measured at historical cost, the fulfillment of the entire or part of the liability gives rise to revenue measured at the value of the consideration received for the part fulfilled. The difference between this revenue and the expenses incurred in fulfilling the obligation is the margin resulting from the fulfillment.
6.30 Information on the cost of assets sold or consumed, including products and services consumed immediately (see item 4.8), and on the consideration received, may have predictive value. This information can be used as data to predict future margins from the future sale of products (including products currently not held by the entity) and services, and thus to assess the entity's prospects for future net cash inflows. To assess the entity's prospects for future cash flows, users of financial statements often focus on the entity's prospects to generate future margins over many periods, not just on its prospects to generate margins from products already held. Revenues and expenses measured at historical cost may also have confirmatory value because they can provide feedback to users of financial statements about their previous forecasts of cash flows or margins. Information on the cost of assets sold or consumed may also help in assessing the efficiency and effectiveness of the entity's management in fulfilling its responsibilities regarding the use of the entity's economic resources.
6.31 For similar reasons, information on interest earned on assets and interest incurred on liabilities, measured at amortized cost, may have predictive and confirmatory value.
Current value
Fair value
6.32 The information provided by measuring assets and liabilities at fair value may have predictive value because fair value reflects the current expectations of market participants regarding the value, timing, and uncertainty of future cash flows. These expectations are priced in such a way as to reflect the current risk preferences of market participants. This information may also have confirmatory value, providing feedback on previous expectations.

6.33 Revenues and expenses that reflect the current expectations of market participants may have some predictive value, as these revenues and expenses can be used as data to predict future revenues and expenses. These revenues and expenses can also help in assessing the efficiency and effectiveness of the entity’s management in fulfilling its responsibilities regarding the use of the entity’s economic resources.

6.34 The change in the fair value of an asset or liability may result from various factors identified in paragraph 6.14. When these factors have different characteristics, separately identifying revenues and expenses that result from these factors may provide useful information to users of the financial statements (see paragraph 7.14(b)).

6.35 If the entity acquired the asset in a market and determines fair value using a different market price (the market in which the entity would sell the asset), any difference between the prices in these two markets is recognized as revenue when that fair value is initially determined.

6.36 The sale of an asset or the transfer of a liability is normally for consideration similar to its fair value, if the transaction had occurred in the market that was the source of the prices used in measuring that fair value. In these cases, if the asset or liability is measured at fair value, the net revenues or expenses resulting at the time of sale or transfer are normally small, unless the effect of transaction costs is significant.

Value in Use and Fulfillment Value

6.37 Value in use provides information about the present value of estimated cash flows from the use of an asset and its final disposal. This information may have predictive value because it can be used in assessing the prospects for future net cash inflows.

6.38 Fulfillment value provides information about the present value of estimated cash flows necessary to satisfy the liability. Thus, fulfillment value may have predictive value, particularly if the obligation is fulfilled rather than transferred or settled by negotiation.

6.39 Updated estimates of value in use or fulfillment value, combined with information about estimates of the amount, timing, and uncertainty of future cash flows, may also have confirmatory value because they provide feedback on previous estimates of value in use or fulfillment value.

Current Cost

6.40 Information about assets and liabilities measured at current cost may be relevant because current cost reflects the cost at which an equivalent asset could be acquired or created at the measurement date or the consideration that would be received for incurring or assuming an equivalent liability.

6.41 Like historical cost, current cost provides information about the cost of consumed assets or about revenue from fulfilling liabilities. This information can be used to obtain current margins and can be used as data to predict future margins. Unlike historical cost, current cost reflects prevailing prices at the time of consumption or fulfillment.

6.42 To report current cost of consumption (or current revenue from fulfillment), it is necessary to separate the change in carrying amount in the reporting period into current cost of consumption (or current revenue from fulfillment) and the effect of price changes. The effect of price changes is sometimes referred to as “holding gain” or “holding loss.”

Table 6.1 – Summary of information provided by specific measurement bases

Assets

Balance Sheet

	Historical Cost	Fair Value (market participant assumptions)	Value in Use (entity-specific assumptions) (a)	Current Cost
Carrying Amount	Historical cost (including transaction costs), to the extent not consumed or uncollected, and recoverable.	Price that would be received to sell the asset (without deducting transaction costs on disposal).	Present value of future cash flows from the use of the asset and its final disposal (after deducting the present value of transaction costs on disposal).	Current cost (including transaction costs), to the extent not consumed or uncollected, and recoverable. (Includes interest accrued on any financing component.)

Income Statement and Comprehensive Income Statement

Event	Historical Cost	Fair Value (market participant assumptions)	Value in Use (entity-specific assumptions)	Current Cost
Initial Recognition (b)	—	Difference between the consideration paid and the fair value of the acquired asset. (c)	Difference between the consideration paid and the value in use of the acquired asset.	—
		Transaction costs on acquisition of the asset.		Transaction costs on acquisition of the asset.
Sale or Consumption of Asset (d), (e)	Expenses equivalent to the historical cost of the sold or consumed asset.	Expenses equivalent to the fair value of the sold or consumed asset.	Expenses equivalent to the value in use of the sold or consumed asset.	Expenses equivalent to the current cost of the sold or consumed asset.
Revenue Received.	Revenue received.	Revenue received.	Revenue received.	Revenue received. (May be presented gross or net.)
		Revenue received. (May be presented gross or net.)	Revenue received. (May be presented gross or net.)	Revenue received. (May be presented gross or net.)
Expenses for transaction costs on sale of the asset.	Expenses for transaction costs on sale of the asset.	Expenses for transaction costs on sale of the asset.	Expenses for transaction costs on sale of the asset.
Interest Revenue	Interest revenue, at historical rates, updated if the asset is subject to variable interest.	Reflected in revenues and expenses from changes in fair value.	Reflected in revenues and expenses from changes in value in use.	Interest revenue, at current rates. (May be identified separately.)
				(May be identified separately.)
Impairment	Expenses incurred because historical cost is no longer recoverable.	Reflected in revenues and expenses from changes in fair value.	Reflected in revenues and expenses from changes in value in use.	Expenses incurred because current cost is no longer recoverable. (May be identified separately.)
				(May be identified separately.)
Changes in Value	Not recognized, except to reflect impairment.	Reflected in revenues and expenses from changes in fair value.	Reflected in revenues and expenses from changes in value in use.	Revenues and expenses reflecting the effect of price changes (holding gains and holding losses).
		For financial assets – revenues and expenses from changes in estimated cash flows.

(a) This column summarizes the information provided if value in use is used as the measurement basis. However, as noted in paragraph 6.75, value in use may not be a practical measurement basis for regular remeasurements.
(b) Revenues or expenses may arise on initial recognition of an asset not acquired on market terms.
(c) Revenues or expenses may arise if the market in which the asset is acquired is different from the market that is the source of the prices used in measuring the fair value of the asset.
(d) Consumption of the asset is normally reported through cost of sales, depreciation, or amortization.
(e) Revenue received is generally equal to the consideration received, but depends on the measurement basis used for any corresponding liability.

Liabilities

Balance Sheet

	Historical Cost	Fair Value (market participant assumptions)	Fulfillment Value (entity-specific assumptions)	Current Cost
Carrying Amount	The consideration received (net of transaction costs) for assuming the unfulfilled portion of the liability, plus the excess of estimated cash outflows over the consideration received.	Price that would be paid to transfer the unfulfilled portion of the liability (excluding transaction costs that would be incurred in the transfer).	Present value of future cash flows that will arise in fulfilling the unfulfilled portion of the liability (including present value of transaction costs to be incurred in fulfillment or transfer).	The consideration (net of transaction costs) that would currently be received for assuming the unfulfilled portion of the liability, plus the excess of estimated cash outflows over that consideration. (Includes interest accrued on any financing component.)

Income Statement and Comprehensive Income Statement

Event	Historical Cost	Fair Value (market participant assumptions)	Fulfillment Value (entity-specific assumptions)	Current Cost
Initial Recognition (a)	—	Difference between the consideration received and the fair value of the liability. (b)	Difference between the consideration received and the fulfillment value of the liability.	—
		Transaction costs when incurring or assuming the liability.		Transaction costs when incurring or assuming the liability.
Fulfillment of Liability	Revenue equal to the historical cost of the fulfilled liability (reflects historical consideration).	Revenue equal to the fair value of the fulfilled liability.	Revenue equal to the fulfillment value of the fulfilled liability.	Revenue equal to the current cost of the fulfilled liability (reflects current consideration).
Expenses for costs incurred in fulfilling the liability.	Expenses for costs incurred in fulfilling the liability.	Expenses for costs incurred in fulfilling the liability.	Expenses for costs incurred in fulfilling the liability. (May be presented net or gross.)
		Expenses for costs incurred in fulfilling the liability. (May be presented net or gross. If gross, historical consideration may be presented separately.)	Expenses for costs incurred in fulfilling the liability. (May be presented net or gross. If gross, historical consideration may be presented separately.)	Expenses for costs incurred in fulfilling the liability. (May be presented net or gross. If gross, historical consideration may be presented separately.)
Transfer of Liability	Revenue equal to the historical cost of the transferred liability (reflects historical consideration).	Revenue equal to the fair value of the transferred liability.	Revenue equal to the fulfillment value of the transferred liability.	Revenue equal to the current cost of the transferred liability (reflects current consideration).
Expenses for costs paid (including transaction costs) to transfer the liability.	Expenses for costs paid (including transaction costs) to transfer the liability.	Expenses for costs paid (including transaction costs) to transfer the liability.	Expenses for costs paid (including transaction costs) to transfer the liability. (May be presented net or gross.)
		Expenses for costs paid (including transaction costs) to transfer the liability. (May be presented net or gross.)	Expenses for costs paid (including transaction costs) to transfer the liability. (May be presented net or gross.)	Expenses for costs paid (including transaction costs) to transfer the liability. (May be presented net or gross.)
Interest Expenses	Interest expenses, at historical rates, updated if the liability is subject to variable interest.	Reflected in revenues and expenses from changes in fair value.	Reflected in revenues and expenses from changes in fulfillment value.	Interest expenses, at current rates. (May be identified separately.)
				(May be identified separately.)
Effect of events that make the liability onerous	Expenses equal to the excess of estimated cash outflows over the historical cost of the liability, or the subsequent change in that excess.	Reflected in revenues and expenses from changes in fair value.	Reflected in revenues and expenses from changes in fulfillment value.	Expenses equal to the excess of estimated cash outflows over the current cost of the liability, or the subsequent change in that excess. (May be identified separately.)
				(May be identified separately.)
Changes in Value	Not recognized, except to the extent that the liability is onerous.	Reflected in revenues and expenses from changes in fair value.	Reflected in revenues and expenses from changes in fulfillment value.	Revenues and expenses reflecting the effect of price changes (holding gains and holding losses).
		For financial liabilities – revenues and expenses from changes in estimated cash flows.

(a) Revenues or expenses may arise on initial recognition of a liability incurred or assumed not on market terms.
(b) Revenues or expenses may arise if the market in which the liability is incurred or assumed is different from the market that is the source of the prices used in measuring the fair value of the liability.

Factors to be considered when selecting the measurement basis

6.43 When choosing the measurement basis for an asset or liability and for the respective revenues and expenses, it is necessary to consider the nature of the information that the measurement basis will produce both in the balance sheet and in the income statement and comprehensive income statement (see paragraphs 6.23 to 6.42 and Table 6.1), as well as other factors (see paragraphs 6.44 to 6.86).

6.44 In most cases, no single factor determines which measurement basis should be chosen. The relative importance of each factor depends on facts and circumstances.

6.45 The information provided by the measurement basis must be useful to users of the financial statements. To achieve this, the information must be relevant and must faithfully represent what it purports to represent. Furthermore, the information provided must be, as far as possible, comparable, verifiable, timely, and understandable.

6.46 As explained in paragraph 2.21, the most efficient and effective process for applying the fundamental qualitative characteristics would generally be to identify the most relevant information about the economic phenomenon. If this information is not available or cannot be provided in a way that faithfully represents the economic phenomenon, the next most relevant type of information is considered. Paragraphs 6.49 to 6.76 provide further discussion on the role played by the qualitative characteristics in choosing the measurement basis.

6.47 The discussion in paragraphs 6.49 to 6.76 focuses on the factors to be considered when selecting the measurement basis for recognized assets and recognized liabilities. Part of this discussion may also apply in choosing the measurement basis for information provided in the notes, for items recognized or not recognized.

6.48 Paragraphs 6.77 to 6.82 discuss additional factors to be considered when choosing the measurement basis on initial recognition. If the initial measurement basis is inconsistent with the subsequent measurement basis, revenues and expenses may be recognized at the time of the first subsequent measurement solely due to the change in measurement basis. Recognizing these revenues and expenses may seem to reflect the transaction or other event when, in fact, no transaction or event occurred. Consequently, the choice of measurement basis for an asset or liability, and for the respective revenues and expenses, is determined by considering both initial measurement and subsequent measurement.

Relevance

6.49 The relevance of the information provided by the measurement basis for an asset or liability and for the respective revenues and expenses is affected by:
(a) the characteristics of the asset or liability (see paragraphs 6.50 to 6.53); and (b) how the asset or liability contributes to future cash flows (see paragraphs 6.54 to 6.57).

Characteristics of the asset or liability

6.50 The relevance of the information provided by the measurement basis depends partially on the characteristics of the asset or liability, in particular, the variation in cash flows and whether the value of the asset or liability is sensitive to market factors or other risks.

6.51 If the value of an asset or liability is sensitive to market factors or other risks, its historical cost may differ significantly from its current value. Consequently, historical cost may not provide relevant information if information about changes in value is important to users of the financial statements. For example, amortized cost may not provide relevant information about a financial asset or financial liability that is derivative.

6.52 Furthermore, if historical cost is used, changes in value are presented not when that value changes, but when an event such as disposal, impairment, or fulfillment occurs. This may be incorrectly interpreted to imply that all revenues and expenses recognized at the time of that event then arose, and not over the periods during which the asset or liability was held. Moreover, because measurement at historical cost does not provide timely information about changes in value, the revenues and expenses presented on this basis may lack predictive value and confirmatory value by not reflecting the full effect of the entity’s exposure to risk from holding the asset or liability during the reporting period.

6.53 Changes in the fair value of an asset or liability reflect changes in market participants’ expectations and changes in their risk preferences. Depending on the characteristics of the asset or liability being measured and the nature of the entity’s business activities, the information reflecting these changes may not always provide predictive value or confirmatory value to users of the financial statements. This may be the case when the entity’s business activities do not involve the sale of the asset or the transfer of the liability, for example, if the entity holds assets exclusively for use or exclusively for receipt of contractual cash flows or if the entity itself must fulfill obligations.

Contribution to future cash flows

6.54 As noted in paragraph 1.14, some economic resources produce cash flows directly; in other cases, economic resources are used in combination to produce cash flows indirectly. How economic resources are used, and thus how assets and liabilities produce cash flows, depends in part on the nature of the business activities conducted by the entity.

6.55 When the entity’s business activity involves the use of various economic resources that produce cash flows indirectly, when used in combination to produce and market products and services to customers, it is likely that historical cost or current cost will provide relevant information about this activity. For example, fixed assets are generally

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CVM RESOLUTION NO. 136, OF JUNE 15, 2022

used in combination with other economic resources of the entity. Similarly, inventory generally cannot be sold to the customer except by making extensive use of other resources of the entity (for example, in production and marketing activities). Items 6.24 to 6.31 and 6.40 to 6.42 explain how measuring these assets at historical cost or current cost can provide relevant information that can be used to obtain the margins achieved during the period.

6.56 For assets and liabilities that produce cash flows indirectly, such as assets that can be sold independently and without significant economic penalty (for example, without significant disruption to the business), it is likely that the measurement basis that provides the most relevant information is current value, which incorporates current estimates of the amount, timing, and uncertainty of future cash flows.

6.57 When the business activity of the entity involves managing financial assets and financial liabilities with the objective of receiving contractual cash flows, amortized cost can provide relevant information, which can be used to obtain the margin between interest earned on assets and interest incurred on liabilities. However, when assessing whether amortized cost provides useful information, it is also necessary to consider the characteristics of the financial asset or financial liability. It is unlikely that amortized cost will provide relevant information about cash flows that depend on factors other than principal and interest.

Faithful Representation

6.58 When assets and liabilities are related in some way, using different measurement bases for these assets and liabilities can create measurement inconsistency (accounting mismatch). If financial statements contain measurement inconsistencies, those financial statements may not faithfully represent some aspects of the entity’s financial position and financial performance. Consequently, in some circumstances, using the same measurement basis for related assets and liabilities may provide users of the financial statements with information that is more useful than information resulting from the use of different measurement bases. This may be particularly likely when the cash flows of an asset or liability are directly linked to the cash flows of another asset or liability.

6.59 As noted in items 2.13 and 2.18, although perfect faithful representation is free from error, this does not mean that measurements must be perfectly accurate in all respects.

6.60 When measurement cannot be determined directly by observing prices in an active market and, instead, must be estimated, measurement uncertainty arises. The level of measurement uncertainty associated with a specific measurement basis can affect whether the information provided by that measurement basis provides a faithful representation of the entity’s financial position and financial performance. A high level of measurement uncertainty does not necessarily prevent the use of a measurement basis that provides relevant information. However, in some cases, the level of measurement uncertainty is so high that the information provided by the measurement basis may not provide a sufficiently faithful representation (see item 2.22).

In these cases, it is appropriate to consider choosing a different measurement basis that also results in relevant information.

6.61 Measurement uncertainty is different from both outcome uncertainty and existence uncertainty:
(a) outcome uncertainty arises when there is uncertainty about the amount or timing of any inflow or outflow of economic benefits that will result from an asset or liability; (b) existence uncertainty arises when it is uncertain whether an asset or liability exists. Items 5.12 to 5.14 discuss how existence uncertainty can affect decisions about whether the entity recognizes an asset or liability when it is uncertain whether that asset or liability exists.

6.62 The presence of outcome uncertainty or existence uncertainty may sometimes contribute to measurement uncertainty. However, outcome uncertainty or existence uncertainty does not necessarily result in measurement uncertainty. For example, if the fair value of an asset can be determined directly by observing prices in an active market, no measurement uncertainty is associated with measuring that fair value, even if it is uncertain how much cash the asset will produce at the end and, consequently, there is outcome uncertainty.

Enhancing Qualitative Characteristics and the Cost Constraint

6.63 The enhancing qualitative characteristics of comparability, understandability, and verifiability, and the cost constraint, have implications for the choice of measurement basis. The following items discuss these implications. Items 6.69 to 6.76 discuss additional implications specific to certain measurement bases. The enhancing qualitative characteristic of timeliness has no specific implications for measurement.

6.64 Just as cost constrains other financial reporting decisions, it also constrains the choice of measurement basis. Therefore, when selecting the measurement basis, it is important to consider whether the benefits of the information provided to users of the financial statements by that measurement basis are likely to justify the costs of providing and using that information.

6.65 Consistently using the same measurement bases for the same items, whether from period to period within the reporting entity or in a single period for different entities, can help make financial statements more comparable.

6.66 A change in the measurement basis may make financial statements less understandable. However, the change may be justified if other factors offset the reduction in understandability, for example, if the change results in more relevant information. If the change is made, users of the financial statements may need explanatory information to allow them to understand the effect of that change.

6.67 Understandability depends partially on how many different measurement bases are used and whether they change over time. In general, if more measurement bases are used in conjunction with the financial statements, the resulting information becomes more complex and, consequently, less understandable, and the totals or subtotals in the statement of financial position and the statement of profit or loss and statement of other comprehensive income become less informative. However, it may be appropriate to use more measurement bases if this is necessary to provide useful information.

6.68 Verifiability is improved by using measurement bases that result in measurements that can be independently corroborated directly, for example, by observing prices, or indirectly, for example, by verifying model input data. If the measurement cannot be verified, users of the financial statements may need explanatory information to allow them to understand how the measurement was determined. In some of these cases, it may be necessary to specify the use of a different measurement basis.

Historical Cost

6.69 In many situations, it is simpler and, therefore, less costly to measure historical cost than to measure current value. In addition, measurements determined by applying the historical cost measurement basis are generally well understood and, in many cases, verifiable.

6.70 However, estimating consumption and identifying and measuring impairment losses or onerous liabilities can be subjective. Consequently, the historical cost of an asset or liability may sometimes be as difficult to measure or verify as current value.

6.71 When using the historical cost measurement basis, identical assets acquired, or liabilities incurred, on different occasions may be presented in the financial statements with different values. This can reduce comparability, both from period to period for the reporting entity or in a single period for different entities.

Current Value

6.72 Because fair value is determined from the perspective of market participants and not from the entity-specific perspective, and is independent of when the asset was acquired or the liability was incurred, identical assets or liabilities measured at fair value are, in principle, measured by the same value by entities that have access to the same markets. This can improve comparability, both from period to period for the reporting entity or in a single period for different entities. On the other hand, because value in use and fulfillment value reflect an entity-specific perspective, these measurements may differ for identical assets or liabilities in different entities. These differences can reduce comparability, especially if the assets or liabilities contribute to cash flows in a similar manner.

6.73 If the fair value of an asset or liability can be determined directly by observing prices in an active market, the process of measuring fair value is low-cost, simple, and easy to understand; and fair value can be verified through direct observation.

6.74 Valuation techniques, sometimes including the use of cash flow-based measurement techniques, may be necessary to estimate fair value when it cannot be observed directly in an active market and are generally necessary in determining value in use and fulfillment value. Depending on the techniques used:
(a) estimating input data for the valuation and applying the valuation technique can be costly and complex; (b) the input data of the process can be subjective and it can be difficult to verify both the input data and the validity of the process itself. Consequently, measurements of identical assets or liabilities may differ. This reduces comparability.

6.75 In many cases, value in use cannot be determined significantly for an individual asset used in combination with other assets. Instead, value in use is determined for a group of assets and the result may then need to be allocated to individual assets. This process can be subjective and arbitrary. In addition, value in use estimates for an asset may inadvertently reflect the effect of synergies with other assets in the group. Consequently, determining the value in use of an asset used in combination with other assets can be a costly process, and its complexity and subjectivity reduce the ability to verify. For these reasons, value in use may not be a practical measurement basis for regular remeasurements of these assets. However, it may be useful for occasional remeasurements of assets, for example, when it is used in impairment testing to determine whether historical cost is fully recoverable.

6.76 When using a current cost measurement basis, identical assets acquired, or liabilities incurred, on different occasions are presented in the financial statements with the same values. This can improve comparability, both from period to period for the reporting entity or in a single period for different entities. However, determining current cost can be complex, subjective, and costly. For example, as noted in item 6.22, it may be necessary to estimate the current cost of an asset by adjusting the current price of a new asset to reflect the current age and condition of the asset held by the entity. In addition, due to changes in technology and changes in business practices, many assets would not be replaced by identical assets. Thus, an additional subjective adjustment to the current price of a new asset would be required to estimate the current cost of an asset equivalent to the existing asset. In addition, separating changes in current cost accounting values between the current cost of consumption and the effect of price changes (see item 6.42) can be complex and require arbitrary assumptions. Because of these difficulties, current cost measurements may lack verifiability and understandability.

Factors Specific to Initial Measurement

6.77 Items 6.43 to 6.76 discuss factors to be considered when choosing the measurement basis, whether for initial recognition or subsequent measurement. Items 6.78 to 6.82 discuss some additional factors to be considered in initial recognition.

6.78 At initial recognition, the cost of an acquired asset, or of an incurred liability, as a result of an event that is a transaction in terms of the market is normally similar to its fair value at that date, unless transaction costs are significant. Notwithstanding, even if these two values are similar, it is necessary to describe which measurement basis is used in initial recognition. If historical cost is used subsequently, this measurement basis is normally also appropriate at initial recognition. Similarly, if current value is used subsequently, it is normally also appropriate at initial recognition. Using the same measurement basis for initial recognition and subsequent measurement avoids recognizing income or expenses at the time of the first subsequent measurement solely due to the change in the measurement basis (see item 6.48).

6.79 When the entity acquires an asset, or incurs a liability, in exchange for the transfer of another asset or liability as a result of a transaction in terms of the market, the initial measurement of the acquired asset, or of the incurred liability, determines whether any income or expenses arise from the transaction. When the asset or the liability is measured at cost, no income or expense arises at initial recognition, unless income or expenses arise from the derecognition of the transferred asset or liability, or unless the asset presents recovery issues or the liability is onerous.

6.80 Assets may be acquired, or liabilities may be incurred, as a result of an event that is not a transaction in terms of the market. For example:
(a) the transaction price may be affected by the relationships between the parties, or by financial difficulties or other pressure from one of the parties; (b) the asset may be granted to the entity free of charge by the government or donated to the entity by another party; (c) the liability may be imposed by law or regulation; or (d) an obligation to pay compensation or a fine for irregularity may arise.

6.81 In these cases, measuring the acquired asset, or the incurred liability, at its historical cost may not provide a faithful representation of the assets and liabilities of the entity and of any income or expenses resulting from the transaction or other event. Thus, it may be appropriate to measure the acquired asset, or the incurred liability, at the assigned cost, as described in item 6.6. Any difference between this assigned cost and any consideration given or received will be recognized as income or expense at initial recognition.

6.82 When assets are acquired, or liabilities are incurred, as a result of an event that is not a transaction in terms of the market, all relevant aspects of the transaction or other event need to be identified and considered. For example, it may be necessary to recognize other assets, other liabilities, contributions from holders of equity interests, or distributions to holders of equity interests to faithfully represent the essence of the effect of the transaction or other event on the financial position of the entity (see items 4.59 to 4.62) and any related effect on the financial performance of the entity.

More Than One Measurement Basis

6.83 Sometimes, considering the factors described in items 6.43 to 6.76 may lead to the conclusion that more than one measurement basis is necessary for an asset or liability and for the respective income and expenses in order to provide relevant information that faithfully represents both the financial position of the entity and its financial performance.

6.84 In most cases, the most understandable way to provide this information is:
(a) using a single measurement basis both for the asset or liability in the statement of financial position and for the respective income and expenses in the statement of profit or loss and the statement of other comprehensive income; and (b) providing additional information in the notes to the financial statements, applying a different measurement basis.

6.85 However, in some cases, this information is more relevant, or results in a more faithful representation, both of the financial position of the entity and of its financial performance, by using:
(a) current value measurement basis for the asset or liability in the statement of financial position; and (b) a different measurement basis for the respective income and expenses in the statement of profit or loss and the statement of other comprehensive income 10 (see items 7.17 and 7.18).
When selecting these measurement bases, it is necessary to consider the factors discussed in items 6.43 to 6.76.

6.86 In these cases, the total income or total expense arising in the period from the change in the current value of the asset or liability is separated and classified (see items 7.14 to 7.19) so that:
(a) the statement of profit or loss includes the income or expenses measured, applying the measurement basis chosen for that statement; and (b) the statement of other comprehensive income includes all remaining income or expenses.
As a result, the accumulated other comprehensive income relating to this asset or liability is equivalent to the difference between:
(i) the carrying amount of the asset or liability in the statement of financial position; and (ii) the carrying amount that would have been determined applying the measurement basis selected for the statement of profit or loss.

Measurement of Equity

6.87 The total carrying amount of equity (total equity) is not measured directly. It is equivalent to the total of the carrying amounts of all recognized assets less the total of the carrying amounts of all recognized liabilities.

6.88 Because general purpose financial statements are not intended to present the value of the entity, the total carrying amount of equity generally does not equate to:
(a) the total market value of equity rights in the entity; (b) the amount that could be raised by selling the entity as a whole on a going concern basis; or (c) the amount that could be raised by selling all the assets of the entity and settling all its liabilities.

6.89 Although total equity is not measured directly, it may be appropriate to measure directly the carrying amount of some individual classes of equity (see item 4.65) and some components of equity (see item 4.66). Notwithstanding, because total equity is measured as a residual value, at least one class of equity cannot be measured directly. Similarly, at least one component of equity cannot be measured directly.

10 The Conceptual Framework does not specify whether the statement(s) of financial performance comprises a single statement or two statements. The Conceptual Framework uses the term “statement of profit or loss” to refer to both a separate statement and a separate section within a single statement of financial performance.

Cash flow-based measurement techniques

6.91 Sometimes measurement cannot be observed directly. In some of these cases, one way to estimate measurement is by using cash flow-based measurement techniques. These techniques are not measurement bases. They are techniques used in the application of a measurement base. Consequently, when using such a technique, it is necessary to identify which measurement base is used and to what extent the technique reflects the factors applicable to that measurement base. For example, if the measurement base is fair value, the applicable factors are those described in paragraph 6.14.

6.92 Cash flow-based measurement techniques can be used in the application of a modified measurement base, for example, modified fulfillment value to exclude the effect of the possibility that the entity might default on an obligation (own credit risk). Modifying measurement bases sometimes may result in information that is more relevant to users of financial statements or that may be less costly to produce or understand. However, modified measurement bases can also be more difficult for users of financial statements to understand.

6.93 Outcome uncertainty (see paragraph 6.61(a)) arises from uncertainties about the amount or timing of future cash flows. These uncertainties are important characteristics of assets and liabilities. When measuring an asset or liability with reference to estimates of uncertain future cash flows, one factor to consider is the possible variations in the estimate of the amount or timing of those cash flows (see paragraph 6.14(b)). These variations are considered when choosing a single value within the range of possible cash flows. The chosen value is sometimes itself the value of possible outcome, but this is not always the case. The value that provides the most relevant information is usually that at the center of the range (central estimate). Different central estimates provide different information. For example:
(a) the expected value (probability-weighted average, also known as the statistical mean) reflects the entire range of outcomes and gives more weight to outcomes that are more likely. The expected value does not intend to predict the definitive cash inflow or outflow or other economic benefits resulting from that asset or liability; (b) the most probable value (similar to the statistical mean) indicates that the probability of subsequent loss is not greater than 50% and that the probability of subsequent gain is not greater than 50%; (c) the most likely outcome (statistical mode) is the single most likely cash inflow or outflow resulting from an asset or liability.

6.94 The central estimate depends on estimates of future cash flows and possible variations in their amounts or timing. It does not capture the price to bear the uncertainty that the final outcome may differ from this central estimate (i.e., the factor described in paragraph 6.14(d)).

Presentation and disclosure as communication tools

7.1 The reporting entity communicates information about its assets, liabilities, equity, income and expenses by presenting and disclosing information in its financial statements.

7.2 Effective communication of information in financial statements makes that information more relevant and contributes to a faithful representation of the entity’s assets, liabilities, equity, income and expenses. It also enhances the understandability and comparability of the information in financial statements. Effective communication of information in financial statements requires:
(a) focusing on principles and disclosure and presentation objectives rather than focusing on rules; (b) classifying information in a way that groups similar items and separates dissimilar items; and (c) aggregating information in such a way that it is not obscured by unnecessary detail or by excessive aggregation.

7.3 Just as cost constrains other financial reporting decisions, it also constrains decisions about presentation and disclosure. Therefore, when making decisions about presentation and disclosure, it is important to consider whether the benefits provided to users of financial statements by presenting or disclosing specific information are likely to justify the costs of providing and using that information.

Objectives and principles of presentation and disclosure

7.4 To facilitate effective communication of information in financial statements, when developing presentation and disclosure requirements in pronouncements, there needs to be a balance between:
(a) giving entities the flexibility to provide relevant information that faithfully represents the entity’s assets, liabilities, equity, income and expenses; and

7.5 Including presentation and disclosure objectives in pronouncements supports effective communication in financial statements because these objectives help entities identify useful information and decide how to communicate that information most efficiently.

7.6 Effective communication in financial statements is also supported by considering the following principles:
(a) entity-specific information is more useful than standardized descriptions, sometimes referred to as “standard”; and (b) duplication of information in different parts of the financial statements is generally unnecessary and may make the financial statements less understandable.

Classification

7.7 Classification is the organization of assets, liabilities, equity, income or expenses based on shared characteristics for the purposes of disclosure and presentation. These characteristics include, among others, the nature of the item, its role (or function) within the business activities conducted by the entity and how it is measured.

7.8 Classifying different assets, liabilities, equity, income or expenses together may obscure relevant information, reduce understandability and comparability and may not provide a faithful representation of what they intend to represent.

Classification of assets and liabilities

7.9 Classification is applied to the unit of account selected for an asset or liability (see paragraphs 4.48 to 4.55). However, it may sometimes be appropriate to separate the asset or liability into components that have different characteristics and classify those components separately. This is appropriate if classifying those components separately would improve the usefulness of the resulting financial information. For example, it may be appropriate to separate an asset or liability into current and non-current components and classify those components separately.

Offsetting

7.10 Offsetting occurs when the entity recognizes and measures both an asset and a liability as separate units of account, but groups them into a single net amount in the statement of financial position. Offsetting classifies different items together and, therefore, is generally not appropriate.

7.11 Offsetting assets and liabilities is different from treating a set of rights and obligations as a single unit of account (see paragraphs 4.48 to 4.55).

Classification of equity

7.13 Similarly, to provide useful information, it may be necessary to classify components of equity separately if some of those components are subject to certain legal, regulatory or other requirements. For example, in some jurisdictions, the entity is permitted to make distributions to holders of rights to equity only if the entity has sufficient reserves specified as distributable (see paragraph 4.66). Separate presentation and disclosure of those reserves may provide useful information.

Classification of income and expenses

7.14 Classification is applied to:
(a) income and expenses resulting from the selected unit of account of an asset or liability; or (b) components of those income and expenses if those components have different characteristics and are identified separately. For example, the change in current value of an asset may include the effects of changes in value and the accrual of interest (see Table 6.1). It is appropriate to classify those components separately if doing so improves the usefulness of the resulting financial information.

Statement of profit or loss and statement of comprehensive income

7.15 Income and expenses are classified and included:
(a) in the statement of profit or loss;
11 or
(b) outside the statement of profit or loss, in the statement of comprehensive income.

7.16 The statement of profit or loss is the primary source of information about the entity’s financial performance for the reporting period. This statement contains a total for profit or loss that provides a highly summarized representation of the entity’s financial performance for the period. Many users of financial statements incorporate this total into their analysis as a starting point for that analysis or as the primary indicator of the entity’s financial performance for the period. Nevertheless, understanding the entity’s financial performance for the period requires the analysis of all income and expenses recognized – including income and expenses included in the statement of comprehensive income – as well as the analysis of other information included in the financial statements.

7.17 Because the statement of profit or loss is the primary source of information about the entity’s financial performance for the period, all income and expenses are, in principle, included in that statement. However, when developing pronouncements, it may be decided that, in exceptional circumstances, income or expenses resulting from changes in the current value of an asset or liability should be included in the statement of comprehensive income if this results in the statement of profit or loss providing more relevant information, or providing a more faithful representation of the entity’s financial performance for that period.

11 The Conceptual Framework does not specify whether the statement(s) of financial performance comprise(s) a single statement or two statements. The Conceptual Framework uses the term “statement of profit or loss” to refer to a separate statement and a separate section within a single statement of financial performance. Similarly, it uses the term “total profit or loss” to refer to both a total for a separate statement and a subtotal for a section within a single statement of financial performance.

7.19 In principle, income and expenses included in the statement of comprehensive income in the period are reclassified from the statement of comprehensive income to the statement of profit or loss in a future period if this results in the statement of profit or loss providing more relevant information, or providing a more faithful representation of the entity’s financial performance for that future period. However, if, for example, there is no clear basis to identify the period in which reclassification would have that result, or the amount that should be reclassified, it may be decided, when developing pronouncements, that income and expenses included in the statement of comprehensive income should not be reclassified subsequently.

Aggregation

7.20 Aggregation is the summing of assets, liabilities, equity, income or expenses that have shared characteristics and are included in the same classification.

7.21 Aggregation makes information more useful by summarizing large amounts of detail. However, aggregation hides some of those details. Therefore, a balance must be observed so that relevant information is not obscured by large amounts of insignificant detail or by excessive aggregation.

7.22 Different levels of aggregation may be necessary in different parts of the financial statements. For example, the statement of financial position, the statement of profit or loss and the statement of comprehensive income normally provide summarized information and more detailed information is provided in the notes.

Capital concept

8.1 The financial concept of capital is adopted by most entities in preparing their financial statements. Under the financial concept of capital, such as invested cash or invested purchasing power, capital is synonymous with net assets or equity of the entity. Under the physical concept of capital, such as operational capacity, capital is considered as the productive capacity of the entity based, for example, on daily production units.

8.2 The selection of the appropriate concept of capital by the entity should be based on the needs of users of its financial statements. Thus, the financial concept of capital should be adopted if users of financial statements are primarily concerned with maintaining the nominal capital invested or with the purchasing power of the capital invested. If, however, the main concern of users is with the operational capacity of the entity, a physical concept of capital should be used. The chosen concept indicates the goal to be achieved in determining profit, although there may be some measurement difficulties to make the concept operational.

Capital maintenance concepts and determination of profit

8.3 The capital concepts in paragraph 8.1 give rise to the following capital maintenance concepts:
(a) Financial capital maintenance. Under this concept, profit is earned only if the financial amount (or money) of net assets at the end of the period exceeds the financial amount (or money) of net assets at the beginning of the period, after excluding any distributions to, and contributions from, owners during the period. Financial capital maintenance can be measured in nominal monetary units or in units of constant purchasing power. (b) Physical capital maintenance. Under this concept, profit is earned only if the physical productive capacity (or operational capacity) of the entity (or the resources or funds required to achieve that capacity) at the end of the period exceeds the physical productive capacity at the beginning of the period, after excluding any distributions to, and contributions from, owners during the period.

8.4 The capital maintenance concept is concerned with how the entity defines the capital it seeks to maintain. It provides the link between the capital concepts and the profit concepts, as it provides the reference point through which profit is measured; it is a prerequisite for

8.5 The concept of physical capital maintenance requires the adoption of current cost as the measurement basis. The concept of financial capital maintenance, however, does not require the use of a specific measurement basis. The selection of the basis in this concept depends on the type of financial capital that the entity is seeking to maintain.

8.6 The main difference between the two concepts of capital maintenance is the treatment of the effects of changes in the prices of the entity's assets and liabilities. In general terms, an entity will have maintained its capital if it has as much capital at the end of the period as it had at the beginning of the period. Any amount above that necessary to maintain the capital at the beginning of the period represents profit.

8.7 Under the concept of financial capital maintenance, where capital is defined in terms of nominal monetary units, profit represents the increase in nominal monetary capital over the period. Thus, increases in the prices of assets held over the period, conventionally referred to as holding gains, are conceptually profits. However, they may not be recognized as such until the assets are disposed of in an exchange transaction. When the concept of financial capital maintenance is defined in terms of units of constant purchasing power, profit represents the increase in the purchasing power invested over the period. Thus, only that part of the increase in asset prices that exceeds the increase in the general price level is considered as profit. The remainder of the increase is treated as an adjustment for capital maintenance and, therefore, as part of equity.

8.8 Under the concept of physical capital maintenance, when capital is defined in terms of physical productive capacity, profit represents the increase in this capital over the period. All price changes that affect the entity's assets and liabilities are seen as changes in the measurement of the entity's physical productive capacity; therefore, they are treated as adjustments for capital maintenance that are part of equity and not as profit.

8.9 The selection of measurement bases and the concept of capital maintenance determine the accounting model used in the preparation of financial statements. Different accounting models present different degrees of relevance and reliability, and, as in other areas, management must seek a balance between relevance and reliability. This Conceptual Framework is applicable to a range of accounting models and provides guidance on the preparation and presentation of financial statements prepared in accordance with the chosen model. It is not currently the intention to prescribe a specific model, except in exceptional circumstances, such as for those entities that report in the currency of a hyperinflationary economy. This intention, however, will be reviewed in light of global developments.

Adjustments for Capital Maintenance

SECURITY AND EXCHANGE COMMISSION OF BRAZIL (CVM) Seven of September Street, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – ZIP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Cincinato Braga Street, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – ZIP: 01333-010 – Brazil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Corporate Financial Center Building, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil - Tel.: (61) 3327-2030/2031 www.cvm.gov.br CVM RESOLUTION NO. 136, OF JUNE 15, 2022
Appendix – Definitions of Terms
The terms defined below are extracted or obtained from the corresponding items of this Conceptual Framework.
Aggregation – The sum of assets, liabilities, equity, revenues or expenses that have shared characteristics and are included in the same classification (EC.7.20).
Asset – A present economic resource controlled by the entity as a result of past events (EC.4.3).
Carrying amount – The amount at which an asset, liability or equity is recognized in the balance sheet. (EC.5.1).
Classification – The organization of assets, liabilities, equity, revenues or expenses based on shared characteristics for the purpose of presentation and disclosure (EC.7.7).
Combined financial statements – Financial statements of the reporting entity that comprise two or more entities that are not all linked by parent-subsidiary relationships (EC.3.12).
Consolidated financial statements – Financial statements of the reporting entity that comprise both the parent and its subsidiaries (EC.3.11).
Control of an economic resource – The present ability to direct the use of the economic resource and to obtain the economic benefits that may flow from it (EC.4.20).
Derecognition – The removal of part or all of a recognized asset or liability from the entity's balance sheet (EC.5.26).
Economic resource – A right that has the potential to produce economic benefits (EC.4.4).
Enhancing qualitative characteristic – A qualitative characteristic that makes useful information more useful. The enhancing qualitative characteristics are comparability, verifiability, timeliness and understandability (EC.2.4 and EC.2.23).
Equity – The residual interest in the assets of the entity after deducting all its liabilities (EC.4.63).
Equity interest – A right to the residual interest in the assets of the entity after deducting all its liabilities (EC.4.64).
Executory contract – A contract, or part of a contract, that is equally unperformed – neither party has fulfilled any of its obligations, or both parties have partially fulfilled their obligations to an equal extent (EC.4.56).
Existence uncertainty – Uncertainty about whether an asset or liability exists (EC.4.13 and EC.4.35).

SECURITY AND EXCHANGE COMMISSION OF BRAZIL (CVM) Seven of September Street, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – ZIP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Cincinato Braga Street, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – ZIP: 01333-010 – Brazil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Corporate Financial Center Building, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil - Tel.: (61) 3327-2030/2031 www.cvm.gov.br CVM RESOLUTION NO. 136, OF JUNE 15, 2022 Expenses – Decreases in assets, or increases in liabilities, that result in decreases in equity, except those relating to distributions to holders of equity interests (EC.4.69). Qualitative characteristic – A qualitative characteristic that financial information must possess to be useful to the primary users of general purpose financial reporting. The fundamental qualitative characteristics are relevance and faithful representation (EC.2.4 and EC.2.5). General purpose financial report – A report that provides financial information about the economic resources of the reporting entity, claims against the entity, and changes in those economic resources and claims that are useful to the primary users in making decisions regarding the provision of resources to the entity (EC.1.2 and EC.1.12). General purpose financial statements – A specific form of general purpose financial reporting that provides information about the assets, liabilities, equity, revenues and expenses of the reporting entity (EC.3.2). Income – Increases in assets, or decreases in liabilities, that result in increases in equity, except those relating to contributions from holders of equity interests (EC.4.68). Liability – A present obligation of the entity to transfer an economic resource as a result of past events (EC.4.26). Material information – Information is material if its omission, misstatement or obscurity could influence the decisions that the primary users of general purpose financial reporting make based on those reports, which provide financial information about the specific reporting entity (EC.2.11). Measurement – The result of applying a measurement basis to an asset or liability and the corresponding revenues and expenses (EC.6.1). Measurement basis – An identified characteristic – for example, historical cost, fair value or fulfillment value – of the item being measured (EC.6.1). Measurement uncertainty – Uncertainty that arises when monetary values in financial reports cannot be observed directly and, instead, must be estimated (EC.2.19). Offsetting – Grouping an asset and a liability that are recognized and measured as separate reporting units into a single net value in the balance sheet (EC.7.10). Outcome uncertainty – Uncertainty about the amount or timing of any inflow or outflow of economic benefits that will result from an asset or liability (EC.6.61). Potential to produce economic benefits – Within an economic resource, the characteristic that already exists and
that, in at least one circumstance, will produce for the entity economic benefits beyond those available to all other parties (EC.4.14).

SECURITY AND EXCHANGE COMMISSION OF BRAZIL (CVM) Seven of September Street, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – ZIP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Cincinato Braga Street, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – ZIP: 01333-010 – Brazil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Corporate Financial Center Building, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil - Tel.: (61) 3327-2030/2031 www.cvm.gov.br CVM RESOLUTION NO. 136, OF JUNE 15, 2022 Primary users (of general purpose financial reports) – Investors, lenders and other existing and potential creditors (EC.1.2). Prudence – The exercise of caution when making judgments under conditions of uncertainty. The exercise of prudence means that assets and income are not overstated and liabilities and expenses are not understated. Similarly, the exercise of prudence does not allow for the understatement of assets or income or the overstatement of liabilities or expenses (EC.2.16). Recognition – The process of capturing for inclusion in the balance sheet or in the statement of profit or loss and in the statement of comprehensive income of an item that meets the definition of one of the elements of financial statements – asset, liability, equity, revenue or expense. Recognition involves reflecting the item in one of these statements – either individually or together with other items – in words and by means of a monetary value, and including that value in one or more totals in that statement (EC.5.1). Reporting entity – An entity that is required to, or decides to, prepare general purpose financial statements (EC.3.10). Unconsolidated financial statements – Financial statements of the reporting entity that is solely the parent (EC.3.11). Reporting unit – A right or group of rights, obligation or group of obligations, or group of rights and obligations, to which recognition criteria and measurement concepts apply (EC.4.48). Useful financial information – Financial information that is useful to the primary users of general purpose financial reporting in making decisions regarding the provision of resources to the reporting entity. To be useful, financial information must be relevant and faithfully represent what it purports to represent (EC.1.2 and EC.2.4). Users (of general purpose financial reports) – See primary users (of general purpose financial reports). This Conceptual Framework replaces CPC 00 (R1) – Conceptual Framework for the Preparation and Disclosure of Financial Reporting.

Lineage: No known changes