CVM Resolution No. 197 of December 26, 2023

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CVM RESOLUTION NO. 197, OF DECEMBER 26, 2023
Approves the Revision Document of Technical Pronouncements No. 24, issued by the Accounting Pronouncements Committee.

The PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION OF BRAZIL – CVM makes public that the Board, in a meeting held on December 26, 2023, 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, APPROVED the following Resolution:

Art. 1. It is made mandatory for publicly-held companies the Revision Document of Technical Pronouncements No. 24, issued by the Accounting Pronouncements Committee – CPC, as per Annex “A” to this Resolution.

Art. 2. This Resolution enters into force on December 29, 2023, observing the following application dates:
I – apply the amendments to CPC 32 for fiscal years starting on or after January 1, 2023; and II – apply the amendments to CPC 03 (R2) and CPC 40 (R1) for fiscal years starting on or after January 1, 2024.

Signed electronically by
JOÃO PEDRO BARROSO DO NASCIMENTO
President

CVM RESOLUTION NO. 197, OF DECEMBER 26, 2023
ANNEX “A”
ACCOUNTING PRONOUNCEMENTS COMMITTEE
REVISION OF TECHNICAL PRONOUNCEMENTS – NO. 24/2023

This revision document presents amendments to the Technical Pronouncements: CPC 03 (R2), CPC 32, CPC 40 (R1).

This document establishes amendments to Technical Pronouncements resulting from changes in International Tax Reform - Pillar Two Model Rules and Supplier Financing Agreements.

The added text is underlined and the deleted text is struck through.

The validity of these amendments will be established by the regulatory bodies that approve them.

Includes items 4A, 88A to 88D and 98M, and illustrative examples after item 88D in CPC 32 – Income Taxes, which shall enter into force with the following wording:

4A This Pronouncement applies to income taxes arising from tax legislation and/or tax regulation promulgated or substantially promulgated to implement the Pillar Two model rules published by the Organisation for Economic Co-operation and Development (OECD), including tax legislation and/or tax regulation that implements national top-up taxes described in those rules. That tax legislation and/or tax regulation and the income taxes arising from it shall hereinafter be referred to as "Pillar Two legislation" and "Pillar Two income taxes". As an exception to the requirements of this Pronouncement, the entity shall not recognise or disclose information about deferred tax assets and liabilities related to Pillar Two income taxes.

International Tax Reform – Pillar Two Model Rules

88A The entity shall disclose that it has applied the recognition and disclosure exception for deferred tax assets and liabilities related to Pillar Two income taxes (see item 4A).

88B The entity shall separately disclose its current income tax expense (income) related to Pillar Two income taxes.

CVM RESOLUTION NO. 197, OF DECEMBER 26, 2023

88C In periods when Pillar Two legislation is promulgated or substantially promulgated but not yet in force, the entity shall disclose known or reasonably estimable information that helps users of the financial statements to understand the entity’s exposure to Pillar Two income taxes arising from that legislation.

88D To meet the disclosure objective in item 88C, the entity shall disclose qualitative and quantitative information about its exposure to Pillar Two income taxes at the end of the reporting period. That information need not reflect all the specific requirements of Pillar Two legislation and may be provided in the form of a range. To the extent that the information is not known or reasonably estimable, the entity shall, instead, disclose a statement to that effect and information about the entity’s progress in assessing its exposure.

Examples illustrating items 88C and 88D

Examples of information that the entity may disclose to meet the objective and requirements of items 88C and 88D include:
(a) qualitative information, such as information about how the entity is affected by Pillar Two legislation and the key jurisdictions in which exposures to Pillar Two income taxes may exist; and (b) quantitative information, such as:
(i) an indication of the proportion of the entity’s profits that could be subject to Pillar Two income taxes and the average effective tax rate applicable to those profits; or (ii) an indication of how the entity’s average effective tax rate would have changed if Pillar Two legislation had been in force.

Effective Date

98M Revision of Technical Pronouncements No. 24, approved by the CPC on December 1, 2023, added items 4A and 88A to 88D to Technical Pronouncement CPC 32 – Income Taxes. The entity shall:
(a) apply items 4A and 88A immediately after the issuance of those amendments and retrospectively, in accordance with CPC 23; and (b) apply items 88B and 88D for annual reporting periods beginning on or after January 1, 2023. The entity need not disclose the information required

CVM RESOLUTION NO. 197, OF DECEMBER 26, 2023

by those items for any interim period ending on or before December 31, 2023.

Includes items 44F to 44H and the related headings and items 62 and 63 in CPC 03 (R2) – Statement of Cash Flows, which shall enter into force with the following wording:

Supplier financing arrangements

44F The entity shall disclose information about its supplier financing arrangements (as described in item 44G) in a way that enables users of the financial statements to evaluate the effects of those arrangements on the entity’s liabilities and cash flows and on the entity’s exposure to liquidity risk.

44G. Supplier financing arrangements are characterised by one or more financiers who offer to pay amounts that the entity owes to its suppliers and the entity agrees to pay, according to the terms and conditions of the arrangement, on the same date that the suppliers are paid or on a later date. Those arrangements provide the entity with extended payment terms or early payment to the entity’s suppliers, compared with the due date of the respective invoice. Supplier financing arrangements are often referred to as “forfaiting”, “confirming” or “factoring” arrangements. Arrangements that represent only a credit enhancement for the entity (for example, financial guarantees, including letters of credit used as guarantees) or instruments used by the entity to settle amounts due directly with a supplier (for example, credit cards) are not supplier financing arrangements.

44H. To meet the objectives in item 44F, the entity shall disclose, in aggregate, the following information about its supplier financing arrangements:
(a) the terms and conditions of the arrangements (for example, extended payment terms and collateral or guarantees provided). However, the entity shall separately disclose the terms and conditions of arrangements that have different terms and conditions. (b) at the beginning and at the end of the reporting period:

CVM RESOLUTION NO. 197, OF DECEMBER 26, 2023

(i) the carrying amounts, and the line items presented in the entity’s statement of financial position, of the financial liabilities that are part of a supplier financing arrangement. (ii) the carrying amounts, and line items, of the financial liabilities disclosed in accordance with item (i) above, for which the suppliers have already been paid by the financiers. (iii) the range of maturity dates (for example, 30 to 40 days after the invoice date) for both the financial liabilities disclosed in accordance with item (i) above and comparable payables to suppliers that are not part of a supplier financing arrangement. Comparable payables to suppliers are, for example, payables to suppliers of the entity in the same line of business or jurisdiction as the financial liabilities disclosed in accordance with (i). If the payment maturity date ranges are extensive, the entity shall disclose explanatory information about those ranges or disclose additional ranges (for example, stratified ranges). (c) the nature and effect of “non-cash” changes in the carrying amounts of the financial liabilities disclosed in accordance with item (b)(i). Examples of “non-cash” changes include the effect of business combinations, foreign exchange variations or other transactions that do not require the use of cash or cash equivalents (see item 43).

Effective date and transition

Revision of Technical Pronouncements No. 24, approved by the CPC on December 1, 2023, added items 44F to 44H to Technical Pronouncement CPC 03 (R2) – Statement of Cash Flows. The entity shall apply these amendments for the annual reporting period beginning on or after January 1, 2024.

63 When applying Revision of Technical Pronouncements No. 24 to Technical Pronouncement CPC 03 (R2) – Statement of Cash Flows, the entity need not disclose:
(a) comparative information for any reporting periods presented before the beginning of the annual reporting period in which the entity first applied these amendments;

CVM RESOLUTION NO. 197, OF DECEMBER 26, 2023

(b) the information required by item 44H(b)(i) and (ii) at the beginning of the annual reporting period in which the entity first applied these amendments; and (c) the information required by items 44F to 44H for any interim period presented within the annual reporting period in which the entity first applied these amendments.

Includes item 44JJ and amends item B11F of Appendix B in CPC 40 (R1) – Financial Instruments: Disclosure, which shall enter into force with the following wording:

Effective date and transition

44JJ Revision of Technical Pronouncements No. 24, approved by the CPC on December 1, 2023, which also amended CPC 03 (R2), amended item B11F. The entity shall apply that amendment when it applies the amendments to CPC 03 (R2).

Quantitative disclosures of liquidity risk (items 34(a) and 39(a) and (b))

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B11F Other factors that the entity may consider when providing the disclosure required in item 39(c) include, but are not limited to, whether the entity:

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(h) has instruments that allow the entity to choose whether to settle its liabilities by delivering cash (or another financial asset) or by delivering its own shares; or (i) has instruments that are subject to master netting arrangements; or (j) has accessed, or has access to, credit lines as per supplier financing arrangements (as described in item 44G of CPC 03 (R2)) that provide the entity with extended payment terms or early payment to the entity’s suppliers.

CVM Resolution No. 197 of December 26, 2023

Lineage: In force