CVM Resolution No. 152 of June 15, 2022

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 – Corporate Financial Center Building, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil - Tel.: (61) 3327-2030/2031 www.gov.br/cvm

CVM RESOLUTION NO. 152, OF JUNE 15, 2022
Ratifies Technical Orientation OCPC 07 of the Accounting Pronouncements Committee, which deals with disclosure in the dissemination of general-purpose financial reports.

THE PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION OF BRAZIL - CVM makes it known 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 capital companies to comply with Technical Orientation OCPC 07, which deals with disclosure in the dissemination of general-purpose financial reports, issued by the Accounting Pronouncements Committee - CPC, is hereby ratified, as set forth in Annex “A” to this Resolution.

Art. 2. CVM Deliberation No. 727, of November 11, 2014, is hereby revoked, from the effective date of this Resolution.

Art. 3. This Resolution enters into force on July 1, 2022.

Electronically signed by
Marcelo Barbosa
President

CVM RESOLUTION NO. 152, OF JUNE 15, 2022
ANNEX “A”
ACCOUNTING PRONOUNCEMENTS COMMITTEE
TECHNICAL ORIENTATION OCPC 07
Disclosure in the Dissemination of General-Purpose Financial Reports

Summary Item
REASONS FOR ISSUING THIS ORIENTATION ON THE PREPARATION OF NOTES TO FINANCIAL STATEMENTS IN1 – IN7 OBJECTIVE 1 – 2 SCOPE 3 – 5 DISCLOSURE ALREADY REGULATED 6 – 30 Main general guidelines contained in the Basic Conceptual Pronouncement 6 – 19 Main general guidelines contained in Technical Pronouncement CPC 26 20 – 28 Main general guidelines contained in the Corporations Law 29 – 30 ADDITIONAL GUIDELINES 31 – 39

CVM RESOLUTION NO. 152, OF JUNE 15, 2022
Reasons for issuing this Orientation on the preparation of notes to financial statements

IN1. The volume of information contained in the dissemination of general-purpose financial reports has raised significant questions from market agents regarding the extent of the material presented. Many agents have noted the existence of irrelevant information, while at the same time commenting on the lack of relevant information.

IN2. The reproduction of information often considered unnecessary is bringing as a consequence an increase in the cost of preparation and dissemination, which is also the focus of complaints from various market agents, from the preparers of financial reports to analysts, including company advisors.

IN3. The presentation of financial statements, according to many, seems to adopt a checklist technique in the disclosures required by the Pronouncements, Interpretations, and Orientations of the Accounting Pronouncements Committee - CPC, often not observing relevance criteria. It has even been stated that the excess of information hinders the adequate decision-making by users of financial statements.

IN4. To the best of our knowledge, this is not a situation typically Brazilian. There is a strong worldwide movement towards finding ways to bring to financial statements only the information that truly interests users in order to guide their decisions regarding an entity. So much so that discussions and recent documents have emerged regarding this, such as:

EFRAG – European Financial Reporting Advisory Group, which recommends to the European Union the adoption or not of documents issued by the IASB (IFRSs), issued in 2012 the document: Towards a Disclosure Framework for the Notes, discussing and collecting opinions specifically on the disclosure of notes to financial statements. As a conclusion, it proposes the elaboration of a specific Conceptual Structure for the presentation of these notes.
The ASAF – Accounting Standards Advisory Forum, of the IASB – International Accounting Standards Board itself, in its September 2013 meeting, intensely discussed the problem and deliberated to propose to the IASB board actions in the direction of disciplining the general guidelines on disclosure and notes to financial statements.
The IASB released the document Discussion Forum – Financial Reporting Disclosure, in May 2013, reporting various manifestations from users, preparers, and auditors regarding difficulties related to the quality of notes to financial statements and recently created a group to discuss exactly the Disclosure Initiative.
The FASB, in March 2014, in a concrete action, issued for discussion the Proposed Statement of Financial Accounting Concepts entitled Conceptual Framework for Financial Reporting, Chapter 8: Notes to Financial Statements (41 pages), as a conceptual structure for the issuance of notes to financial statements.
The IASB, also in March 2014 and also in a concrete action, released the staff paper on the Disclosure Initiative project on Materiality, and the exposure draft ED/2014/1 Disclosure Initiative – proposed amendments to IAS 1, with the objective of introducing modifications in IAS 1,

CVM RESOLUTION NO. 152, OF JUNE 15, 2022
Technical Pronouncement CPC 26 – Presentation of Financial Statements, resulting from a series of short and medium-term projects aimed at improving presentation and disclosure principles through the use of judgment and the concept of materiality by entities.

IN5. This CPC decided, therefore, to carry out some surveys and concluded that there are already guidelines on disclosure, especially in notes to financial statements, in various Pronouncements, Interpretations, and Orientations, mainly in the Basic Conceptual Pronouncement - Conceptual Structure for Preparation and Disclosure of Financial Report and in Technical Pronouncement CPC 26, as well as in the Corporations Law itself (6.404/76) and in documents from various regulatory bodies.

IN6. It also concluded that there is a possibility of issuing some orientations on this disclosure.

IN7. After analyzing this situation and considering that it may take some time until the IASB concludes the ongoing projects related to this topic and makes the modifications that may accelerate this process, this Committee deliberated to consider the issuance of this Orientation in order to clarify and reinforce that, in the financial statements and their respective notes to financial statements, relevant information (and only that) that actually assists users should be disclosed, considering the existing regulations, without the minimum requirements existing in each Accounting Pronouncement issued by this CPC failing to be met.

Objective

The objective of this Orientation is to deal with the basic requirements of preparation and disclosure to be observed when disseminating general-purpose financial reports.
This Orientation is dealing, specifically, with the disclosure of information specific to annual and interim financial statements, especially those contained in the notes to financial statements.

Scope

This Orientation deals essentially with disclosure issues, not reaching recognition and measurement issues.
It consolidates requirements already existing in Pronouncements, in Interpretations, and in other Orientations of this Committee, as well as in the Law, without altering such requirements.
For the purposes of this Orientation, the word relevance is always used, remembering that this concept encompasses that of materiality and of the word significant. And the expression accounting policies is used, which also encompasses accounting practices and criteria.

CVM RESOLUTION NO. 152, OF JUNE 15, 2022
Disclosure already regulated
Main general guidelines contained in the Basic Conceptual Pronouncement

The objective of the general-purpose financial report, as already established in item OB2 of the Basic Conceptual Pronouncement - Conceptual Structure for Preparation and Disclosure of Financial Report, “is to provide financial accounting information about the entity reporting this information that is useful to existing and potential investors, lenders, and other creditors, when making decisions related to providing resources to the entity.” (underlines added, abbreviated: s.a.)
Useful information is that endowed with the fundamental qualitative characteristics of the financial report. These characteristics, according to this same Basic Conceptual Pronouncement, item QC5, are “relevance and faithful representation”. (s.a.)
Item QC6 of this Conceptual Structure defines: “Relevant financial accounting information is that capable of making a difference in the decisions that may be taken by users.” (s.a.)
And QC11 reinforces: “Information is material if its omission or its distorted disclosure could influence decisions that users make based on financial accounting information about a specific entity that reports the information.” (s.a.)
It is inferred from these provisions that all information specific to financial statements of which the entity has knowledge that can actually influence investors and creditors, and only these, must be disclosed. The disclosure of irrelevant information usually causes the bad effect of diverting the user's attention, which directly contradicts the objective of faithful disclosure.
Item QC12 states, addressing the financial statement (which includes the notes to financial statements): “to be a perfectly faithful representation, the reality portrayed needs to have three attributes. It has to be complete, neutral, and free from error”. (s.a.)
This item highlights the preparer's responsibility regarding the completeness of information, the obligation that the information and comments related to it be neutral, which includes qualification and adjectivation, and the care for the non-existence of errors.
It cites QC4: “If financial accounting information is to be useful, it needs to be relevant and faithfully represent what it proposes to represent. The usefulness of financial accounting information is improved if it is comparable, verifiable, timely, and understandable.” (s.a.)
Attention is drawn in this item QC4 to the item understandability, which includes the nomenclature of accounts in the statements and the wording used in the notes to financial statements. The minimum knowledge required of the user of financial statements does not necessarily cover the same depth as experts, nor the same terminologies too specific to the entity or the economic segment to which the entity belongs.

CVM RESOLUTION NO. 152, OF JUNE 15, 2022 economic segment to which the entity belongs. Thus, only when absolutely unavoidable, should specific technical language of the entity or sector be used. It is convenient to consider, in this case, the presentation of a complete and concise glossary along with the statements.

Relevance, according to the Conceptual Structure, is based on the nature or magnitude of the information, or both. Consequently, one cannot a priori specify a uniform quantitative limit for relevance or predetermine what would be judged relevant for a particular situation. For this reason, the judgment on the relevance of information will be, practically, case by case. Item QC11 states: “materiality is an aspect of relevance specific to the entity based on the nature or magnitude, or both, of the items for which information is related in the context of the financial report of a particular entity”. (s.a.)
Thus, normally numbers significant for the size of the entity are material/relevant by their potential influence on users' decisions, but certain values, even if small in absolute or percentage terms, can be relevant due not to their size, but to their nature. This means that they may be of interest for user decision due to the importance of the information in terms of governance, possible future impact, social information, etc.
In summary, the Conceptual Structure determines that all information is relevant and must be disclosed if its omission or distorted disclosure could influence decisions that users make based on the general-purpose financial report of the specific entity reporting the information. Consequently, if it does not have this characteristic, the information is not relevant and should not be disclosed. Moreover, when information is relevant, it must be complete, neutral, free from error, comparable, verifiable, timely, and understandable.
This set cited in the previous items evidences that the focus to be considered in the preparation and analysis of financial statements is that of the relevance of information necessary for the decision-making process of investors and creditors.
Consequently, relevant information of which the entity has knowledge cannot be missing from the financial statements, nor should irrelevant information be disclosed.

Main general guidelines contained in Technical Pronouncement CPC 26

Technical Pronouncement CPC 26 – Presentation of Financial Statements determines, in its items 29 to 31, that:
“The entity must present separately in the financial statements each class of material similar items. The entity must present separately items of distinct nature or function, unless they are immaterial.” (s.a.)
“If an item is not individually material, it must be aggregated with other items, either in the financial statements or in the notes to financial statements.” But observed that “an item may not be sufficiently material to justify its individual presentation in the financial statements, but may be sufficiently material to be presented individually in the notes to financial statements.”
“The entity does not need to provide a specific disclosure, required by a Technical Pronouncement, Interpretation, or Orientation of the CPC, if the information is not material.” (s.a.)
These three items, in summary, lead to the conclusion that disclosure, both in the statements and in the notes to financial statements, must be of information relating to items grouped by similarity (not equality) in their nature and in their function. However, if irrelevant, they can be inserted in other groups for presentation purposes.
And another fundamental conclusion: any specific information requested by any Pronouncement, Interpretation, or Orientation that is not relevant should not be disclosed, including to not divert the user's attention, with the exception of that expressly required by a regulatory body.
Item 113 of the same Pronouncement determines that “notes to financial statements should be presented, as far as practicable, in a systematic manner. Each item of the financial statements must have a cross-reference with the respective information presented in the notes to financial statements.”
Item 114 states that “notes to financial statements are normally presented” in a certain order that explicitly (declaration of conformity, summary of accounting policies, supporting information, etc.), but does not oblige that this be the order to be used.
On the contrary, item 115 is explicit: “In some circumstances, it may be necessary or desirable to change the order of certain items in the notes to financial statements. For example, information about changes in fair value recognized in profit or loss may be disclosed together with information about maturities of financial instruments, although the first relates to the statement of profit or loss and the latter relates to the balance sheet. However, as far as practicable, a systematic structure of the notes to financial statements should be maintained” (s.a.). Thus, the order may be that which the entity's administration considers most appropriate; however, it is recommended that there be uniformity in the form of presentation of information in notes to financial statements with respect to preceding periods to assist comparability between financial statements of one period with respect to previous periods.
Item 117 of the same Pronouncement determines that “the entity must disclose in the summary of significant accounting policies:

(a) the basis (or bases) of measurement used(s) in the preparation of the financial statements; and

(b) other accounting policies used that are relevant to the understanding of the financial statements.”

CVM RESOLUTION NO. 152, OF JUNE 15, 2022

Item 116 clarifies: “Notes to financial statements that provide information about the basis for the preparation of the financial statements and specific accounting policies can be presented as a separate section of the financial statements.” (s.a.)
It is inferred from the previous items that the entity should only disclose the bases of preparation of the statements and its accounting policies that are its own, its specific. In this way, accounting policies that are not applicable to it do not require disclosure, as well as accounting policies based on standards that do not present any alternative. This covers documents both in force and those that will be in force in the future.

Main general guidelines contained in the Corporations Law

Law No. 6.404/76 expressly requires notes that clarify the financial situation and results, and mentions the obligation to present accounting policies that are specific and apply to significant business and events. Its art. 176 determines:

“§ 5th The notes to financial statements must:

I – present information about the basis of preparation of the financial statements and specific accounting practices selected and applied for significant business and events;
....

IV – indicate:

a) the main criteria for the valuation of asset elements...” (s.a.)

That is, the Corporations Law follows the same line of requiring notes on bases of preparation and on accounting policies that are specific to the reporting entity and that are related to relevant items. The mention of bases and policies not specific to the entity and referring to non-relevant items can also divert the user's attention.

Summary of the main general guidelines contained in the cited texts

The CPC emphasizes, therefore, that these cited documents already specify that:

A. All disclosed information must be relevant to external users. And they are only relevant if they influence the decision-making process of investors and creditors. Consequently, non-relevant ones should not be disclosed.

B. Relevance, in turn, encompasses the concepts of magnitude and nature of the information, viewed from the users' perspective.

C. Only relevant and entity-specific information should be disclosed, both those related to accounting policies and all other notes, including those related to probable effects of accounting policies to be adopted in the future.

D. The mention, in CPC Pronouncements, Interpretations, and Orientations, and in Law, of disclosure requirements must always be interpreted in light of the relevance of the information to be disclosed, even if the expressions “minimum disclosure”, “at least” and similar appear.

E. On the other hand, no relevant information that could influence the user of the statements

SECURITY AND EXCHANGE COMMISSION OF BRAZIL (CVM) Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – CEP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – CEP: 01333-010 – Brazil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – CEP: 70712-900 – Brazil - Tel.: (61) 3327-2030/2031 www.gov.br/cvm

CVM RESOLUTION NO. 152, OF JUNE 15, 2022

accounting of the entity may fail to be evidenced, even if there is no explicit mention of it in Law or in a CPC document.

F. The spirit of simple check-list compliance does not, absolutely, meet the necessary requirements for achieving the objectives of general-purpose financial reports.

Additional Guidelines

Although not specifically mentioned in these cited documents, within the set of Pronouncements, Interpretations, and Guidelines of this CPC, there is always present the need to emphasize information related to all topics that may represent risks for the entity. For example, in Technical Pronouncement CPC 26, this can be seen explicitly in items 114, 125, 126, and 128. Consequently, this CPC understands that within the concept of relevance, this characteristic must always be considered.
In the explanatory notes regarding the bases for the preparation of financial statements and the specific accounting policies of the entity, the texts of normative acts should not be repeated, but only the main relevant aspects applicable to the entity should be summarized.
Only mentions of the numbers and names of documents of this CPC may be made, along with a summary of the main relevant aspects specifically applicable to the entity.
When there is a choice between two or more accounting policies permitted to the entity and when there is a change in accounting policy, the note must clarify in detail such facts, the reasons for the choice or change, and the consequences for the financial statements.
Notes on accounting policies may be inserted together with the notes relating to the items contained in the financial statements to which they refer.
The order of presentation of the explanatory notes, after those relating to the operational context and the statement of compliance, may follow the order of relevance of the subjects treated, always obeying the requirement of cross-reference between the notes and the items of the financial statements or to other notes to which they refer.
In the drafting of the notes, there should be, as much as possible, no repetition of facts, policies, and other information so as not to divert the user's attention.
The administration of the entity must, in the statement of compliance note, affirm that all relevant information specific to the financial statements, and only that information, is being evidenced, and that it corresponds to that used by it in its management.
In the evaluation of relevance, the information from the individual statements and the information from the consolidated statements must be considered separately, as it is possible that certain information is relevant in one case and not in the other.

CVM Resolution No. 152 of June 15, 2022

Lineage: Superseded

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