CVM Resolution No. 211 of September 23, 2024

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL
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CVM RESOLUTION NO. 211, OF SEPTEMBER 23, 2024
Approves Technical Pronouncement CPC 18 (R3) – Investment in Associate and in Joint Venture, 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 September 18, 2024, 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 Technical Pronouncement CPC 18 (R3) – Investment in Associate and in Joint Venture, issued by the Accounting Pronouncements Committee – CPC, as per Annex “A” to this Resolution.

Art. 2. Resolution CVM 118, of June 3, 2022, is revoked, on the date this Resolution enters into force.

Art. 3. This Resolution enters into force on January 1, 2025, applying to fiscal years beginning on or after that date.

Signed electronically by
JOÃO PEDRO BARROSO DO NASCIMENTO
President

CVM RESOLUTION NO. 211, OF SEPTEMBER 23, 2024
ANNEX “A”
ACCOUNTING PRONOUNCEMENTS COMMITTEE
TECHNICAL PRONOUNCEMENT CPC 18 (R3)
Investment in Associate and in Joint Venture
Correlation to International Accounting Standards – IAS 28

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Table of Contents Item
OBJECTIVE 1
SCOPE 2-2A
DEFINITIONS 3 – 4
SIGNIFICANT INFLUENCE 5 – 9
EQUITY METHOD 10 – 15
APPLICATION OF THE EQUITY METHOD 16 – 43
Exceptions to the application of the equity method 17 – 19 Classification as held for sale 20 – 21 Discontinuation of the use of the equity method 22 – 24 Changes in ownership interest 25 Procedures for the equity method 26 – 39 Impairment losses 40 – 43 SEPARATE FINANCIAL STATEMENTS 44 TRANSITIONAL PROVISIONS 45G – 47

CVM RESOLUTION NO. 211, OF SEPTEMBER 23, 2024
Objective

The objective of this Pronouncement is to establish the accounting for investments in associates and to define the requirements for the application of the equity method when accounting for investments in associates and in joint ventures.

Scope
2. This Pronouncement shall be applied by all entities that are investors with joint control of an investee or with significant influence over it.

2A. In individual financial statements, investments in subsidiaries shall be measured using the equity method as determined by law. See Technical Interpretation ICPC 09 – Individual Financial Statements, Separate Financial Statements, Consolidated Financial Statements and Application of the Equity Method and Technical Pronouncement CPC 35 – Separate Financial Statements, when applicable.

Definitions
3. The following terms are used in this Pronouncement with the following meanings:

Associate is the entity over which the investor has significant influence.

Consolidated financial statements are the financial statements of an economic group, in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as if they were a single economic entity.

Equity method is the accounting method by which the investment is initially recognized at cost and, from then on, is adjusted to reflect the post-acquisition change in the investor’s interest in the net assets of the investee. The investor’s income or expenses include its share of the profits or losses of the investee, and the investor’s other comprehensive income includes its share of the other comprehensive income of the investee.

Joint arrangement is a business arrangement in which two or more parties have joint control.

Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

Joint venture is a joint arrangement by which the parties that have joint control of the contractual arrangement have rights to the net assets of the arrangement.

Joint venturer is a party to a joint venture that has joint control of that joint venture.

Significant influence is the power to participate in the financial and operating policy decisions of the investee, but not control or joint control of those policies.

The following terms are defined in item 4 of Technical Pronouncement CPC 35 – Separate Financial Statements and in Appendix A of Technical Pronouncement CPC 36 – Consolidated Financial Statements and are used in this Pronouncement with the meanings specified in the CPC Pronouncements, Interpretations and Guidelines in which they are defined:

control of investee;
economic group;
parent;
separate financial statements;
subsidiary.

Significant influence
5. If the investor holds, directly or indirectly (e.g., through subsidiaries), twenty percent or more of the voting power of the investee, it is presumed that it has significant influence, unless it can be clearly demonstrated that this is not the case. On the other hand, if the investor holds, directly or indirectly (e.g., through subsidiaries), less than twenty percent of the voting power of the investee, it is presumed that it does not have significant influence, unless such influence can be clearly demonstrated. Substantial or majority ownership of the investee by another investor does not necessarily prevent an investor from having significant influence over it.

The existence of significant influence by an investor is usually evidenced by one or more of the following:
(a) representation on the board of directors or executive board of the investee; (b) participation in the policy-making process, including decisions on dividends and other distributions; (c) material transactions between the investor and the investee; (d) interchange of managerial personnel; (e) provision of essential technical information.
The entity may hold subscription warrants, share purchase options, convertible debt or equity instruments or other similar instruments that have the potential to, if exercised or converted, confer additional voting power on the entity or reduce the voting power of another party over the financial and operating policies of the investee (i.e., potential voting rights). The existence and effect of potential voting rights that are currently exercisable or convertible, including potential voting rights held by other entities, shall be considered in assessing whether the entity has significant influence. Potential voting rights are not currently exercisable or convertible when, for example, they cannot be exercised or converted until a future date or until the occurrence of a future event.
When assessing whether potential voting rights contribute to significant influence, the entity shall examine all facts and circumstances (including the terms of exercise of the potential voting rights and any other contractual agreements considered individually or in aggregate) that may affect the potential rights, except the intention of management and the financial ability to exercise or convert them.
The entity loses significant influence over the investee when it loses the power to participate in the decisions on the financial and operating policies of that investee. The loss of significant influence may occur with or without a change in the absolute or relative level of shareholding. This may occur, for example, when an associate becomes subject to the control of government, court, administrative body or regulatory authority. This may also occur as a result of a contractual agreement.

Equity method
10. Under the equity method, the investment in an associate or in a joint venture shall be initially recognized at cost and its carrying amount shall be increased or decreased to recognize the investor’s share of the profits or losses of the period generated by the investee after acquisition. The investor’s share of the investee’s profit or loss for the period shall be recognized in the investor’s profit or loss. Distributions received from the investee reduce the carrying amount of the investment. Adjustments to the carrying amount of the investment are also necessary to recognize the investor’s proportional share of changes in the balance of the components of the other comprehensive income of the investee. Such changes include those arising from the revaluation of property, plant and equipment, and foreign currency translation differences, when applicable. The investor’s share of these changes shall be recognized in the investor’s other comprehensive income (see Technical Pronouncement CPC 26 – Presentation of Financial Statements).

Recognizing income based on distributions received may not be an adequate measure of the revenue earned by the investor in its investment in an associate or in a joint venture, because the distributions received may have little relation to the performance of the investee. Because the investor has joint control or exercises significant influence over the investee, it has a share in the performance of the investee and, as a result, a share in the return on its investment. The investor shall account for this share by extending the scope of its financial statements by including its share of the profits or losses of the investee. As a result, the application of the equity method provides reporting with a higher degree of information about the investor’s net assets and about its income and expenses.
When there are potential voting rights or other derivatives containing potential voting rights, the entity’s interest in the investee shall be determined exclusively based on the existing ownership interest and shall not reflect the possible exercise or conversion of the potential voting rights or other derivative instruments, unless item 13 applies to the case.
In some circumstances, the entity has, in essence, an ownership interest resulting from a transaction that gives it, at the current time, access to the returns associated with the ownership interest. In these circumstances, the proportion allocated to the entity shall be determined taking into account the eventual exercise of potential voting rights and other derivative instruments that currently give the entity access to the returns.
CPC 48 – Financial Instruments shall not be applied to interests in the investee that are accounted for using the equity method. When there are instruments containing potential voting rights that, in essence, currently enable access to the returns associated with the interest held in the investee, such instruments are not subject to CPC 48. In all other cases, instruments containing potential voting rights in an investee shall be accounted for in accordance with CPC 48.

14A. The entity shall also apply CPC 48 to other financial instruments in an associate or in a joint venture for which the equity method is not applied. These instruments include long-term interests that, in substance, form part of the entity’s net investment in the associate or joint venture (see item 38). The entity shall apply CPC 48 to such long-term interests before applying item 38 and items 40 to 43 of this pronouncement. When applying CPC 48, the entity shall not take into account any adjustments to the carrying amount of long-term interests resulting from the application of this pronouncement.

Unless an investment or part of that investment in an investee is classified as “held for sale”, in accordance with Technical Pronouncement CPC 31 – Non-Current Assets Held for Sale and Discontinued Operations, the investment, or any interest retained in the investment not classified as held for sale, shall be classified as a non-current asset.

Application of the equity method
16. The entity with joint control, or with significant influence over an investee, shall account for this investment using the equity method, unless the investment falls within the exceptions provided for in items 17 to 19 of this Pronouncement.

Exceptions to the application of the equity method
17. The entity need not apply the equity method to investments in which it has joint control, or exercises significant influence, if the entity is a parent that, if legally permitted, is exempt from preparing consolidated financial statements due to its inclusion in the scope of the exception of item 4(a) of CPC 36, or if all of the following items are met:
(a) the entity is controlled (wholly or partially) by another entity, which, together with the other shareholders or partners, including those without voting rights, has been informed about and has not objected to the non-application of the equity method; (b) the entity’s debt or equity instruments are not traded publicly (domestic or foreign stock exchanges or over-the-counter market, including local and regional markets); (c) the entity has not filed and is not in the process of filing its financial statements with the Securities and Exchange Commission of Brazil (CVM) or another regulatory body, for the purpose of issuing and/or publicly distributing any type or class of instruments in the capital market; and (d) the ultimate parent or any intermediate parent of the entity makes its financial statements available to the public, prepared in accordance with the CPC Pronouncements, Interpretations and Guidelines, in which the subsidiaries are consolidated or are measured at fair value through profit or loss in accordance with Technical Pronouncement CPC 36

When the investment in an associate or in a joint venture is held, directly or indirectly, by the entity that is a venture capital organization, or mutual fund, trust entity and similar entities, including investments in investment funds linked to an insurance contract, this entity may adopt fair value measurement through profit or loss for these investments, in accordance with CPC 48. An example of an investment fund linked to an insurance contract is a fund maintained by an entity as the underlying items of a group of insurance contracts with direct participation features.

For the purposes of this option, insurance contracts include investment contracts with discretionary participation features. The entity shall make this choice separately for each associate or joint venture at its initial recognition (See CPC 50 – Insurance Contracts for the terms used in this item that are defined in this Pronouncement).

When the entity holds an investment in an associate or in a joint venture, the portion of the interest held indirectly through a venture capital organization or mutual fund, trust entity and similar entities, insurance investments held by a fund, the entity may adopt fair value measurement through profit or loss for that portion of the interest in the investment, in accordance with CPC 48, regardless of whether the venture capital organization or mutual fund, trust entity and similar entities, insurance investments held by a fund, including investment-linked insurance funds, exercise significant influence over that portion of the interest. If

if the entity makes this accounting choice, it must adopt the equity method for the remaining portion of the interest it holds in the investment in an associate, or in a jointly controlled entity that is not held indirectly through a venture capital organization or mutual fund, fiduciary entity and similar entities, including insurance investments held by a fund.

Classification as held for sale
20. The entity must apply CPC 31 to an investment, or portion of an investment, in an associate, or in a jointly controlled entity that meets the criteria required for its classification as “held for sale”. Any retained portion of an investment in an associate or in a jointly controlled entity that has not been classified as “held for sale” must be accounted for using the equity method until the effective derecognition of the portion classified as held for sale. After effective derecognition, the entity must account for any remaining interest in the investment in the associate or in the jointly controlled entity, in accordance with CPC 48, unless the remaining interest continues to be an associate or a jointly controlled entity, in which case the equity method must be used.

When the investment, or portion of an investment, in an associate or in a jointly controlled entity, previously classified as “held for sale”, no longer meets the conditions required to be classified as such, the equity method must be applied retrospectively, from the date of its classification as “held for sale”. The financial statements for the periods covered since the classification of the investment as “held for sale” must be adjusted to reflect this information.

Discontinuation of the use of the equity method
22. The entity must discontinue the use of the equity method from the date on which the investment ceases to qualify as an associate or as a jointly controlled entity, as guided below:
(a) if an investment becomes a subsidiary, the entity must record this investment in accordance with CPC 15 – Business Combinations and CPC 36 – Consolidated Financial Statements.
(b) if the remaining interest in the investment, previously qualified as an associate, or jointly controlled entity, is a financial asset, the entity must measure it at fair value. The fair value of the remaining interest must be considered as its fair value at initial recognition as a financial asset, in accordance with CPC 48. The entity must recognize in the statement of profit or loss any difference between:
(i) the fair value of any remaining interest and any consideration arising from the disposal of part of the interest in the investment; and (ii) the carrying amount of the entire investment on the date of discontinuation of the use of the equity method; (c) when the entity discontinues the use of the equity method, it must account for all amounts previously recognized in other comprehensive income, and which are related to the investment subject to the change in accounting measurement, on the same basis as would be required if the investee had directly disposed of the related assets and liabilities.

Thus, just as revenue or expense previously recognized in other comprehensive income by the investee would be reclassified to the statement of profit or loss as revenue or expense upon the derecognition or settlement of related assets or liabilities, the entity must reclassify the revenue or expense recognized in its equity to the statement of profit or loss (as a reclassification adjustment) when the equity method is discontinued. For example, if the associate or the jointly controlled entity has accumulated translation differences related to the foreign entity and the investor decides to discontinue the use of the equity method, the investor must reclassify to the statement of profit or loss, as revenue or expense, the revenue or expense previously recognized reflectively in other comprehensive income related to the foreign entity.
If the investment in an associate becomes an investment in a jointly controlled subsidiary or the investment in a jointly controlled subsidiary becomes an investment in an associate, the entity must continue to adopt the equity method and not proceed to remeasure the retained interest.

Changes in equity participation
25. If the entity’s equity participation in an associate or in a jointly controlled entity is reduced, but the investment continues to be classified, respectively, as an investment in an associate or in a jointly controlled entity, the investor must reclassify to the statement of profit or loss the proportion of revenue or expense previously recognized in other comprehensive income that is related to the reduction in equity participation, if such gain or loss would have to be reclassified to the statement of profit or loss, in the event of derecognition or settlement of the related assets or liabilities.

Procedures for the equity method
26. Many of the procedures that are appropriate for the application of the equity method are similar to the consolidation procedures described in Technical Pronouncement CPC 36 – Consolidated Financial Statements. In addition, the concepts underlying the procedures used to account for the acquisition of a subsidiary must also be adopted to account for the acquisition of an investment in an associate or in a jointly controlled entity.

The group’s participation in an associate or in a jointly controlled entity is given by the sum of the interests held by the parent and its other subsidiaries in the investment. Interests held by other associates or jointly controlled entities of the group must be ignored for this purpose. When the associate or the jointly controlled entity has investments in subsidiaries, in associates or in jointly controlled entities, the results, other comprehensive income and net assets considered for the application of the equity method must be those recognized in the financial statements of the associate or of the jointly controlled entity (including the interest held by the associate or by the jointly controlled entity in the results, in other comprehensive income and in the net assets of its associates and of its jointly controlled entities), after making the necessary adjustments to harmonize accounting practices (see items 35 to 36A).
The results arising from upstream and downstream transactions involving assets that do not constitute a business, as defined by Technical Pronouncement CPC 15, between the investor (including its consolidated subsidiaries) and the associate or the jointly controlled entity must be recognized in the investor’s financial statements only to the extent of the interest of other investors in that associate or jointly controlled entity, provided that these other investors are independent parties from the economic group to which the investor belongs. Upstream transactions are, for example, sales of assets from the associate or the jointly controlled entity to the investor. Downstream transactions are, for example, sales of assets from the investor to the associate or to the jointly controlled entity. The investor’s interest in the results of the associate or jointly controlled entity resulting from these transactions must be eliminated.
When downstream transactions provide evidence of a reduction in the net realizable value of assets to be sold or contributed, or of impairment loss of these assets, such losses must be recognized in full by the investor. When upstream transactions provide evidence of a reduction in the net realizable value of assets to be acquired or of impairment loss of these assets, the investor must recognize its share in these losses.
The gain or loss resulting from the contribution by means of a non-monetary asset, which does not constitute a business, as defined in Technical Pronouncement CPC 15, of equity interest subscribed in an associate or in a jointly controlled entity must be accounted for in accordance with the provisions of item 28, except if the transaction does not have a commercial nature, as applied by Technical Pronouncement CPC 27 - Property, Plant and Equipment. If such transaction does not have a commercial nature, the gain or loss must be considered as unrealized and must not be recognized, unless item 31 is also applicable. The unrealized gain or loss must be eliminated against the investment accounted for according to the equity method and must not be presented as deferred gain or loss in the consolidated balance sheet or in the balance sheet of the entity in which the investments are accounted for based on the equity method.
If in addition to the equity interest received in an associate or in a jointly controlled entity, the entity also receives monetary and non-monetary assets, the entity must recognize in full in the statement of profit or loss the portion of the gain or loss of the non-monetary asset contributed with respect to the monetary or non-monetary asset received.

31A. The gain or loss resulting from a downstream transaction involving assets that constitute a business, as defined in Technical Pronouncement CPC 15, between the entity (including its consolidated subsidiaries) and its associate or jointly controlled entity must be recognized in full in the investor’s financial statements.

31B. The entity may sell or deliver assets as payment in two or more agreements (transactions). In determining whether the assets that are sold or delivered as payment constitute a business, as defined in Technical Pronouncement CPC 15, the entity must consider whether the sale or delivery as payment of these assets is part of several agreements that must be accounted for as a single transaction, in accordance with the requirements of item B97 of Technical Pronouncement CPC 36.

The investment in an associate and in a jointly controlled entity must be accounted for by the equity method from the date on which the investment becomes its associate or jointly controlled entity. Upon acquisition of the investment, any differences between the cost of the investment and the investor’s interest in the net fair value of the identifiable assets and liabilities of the investee must be accounted for as follows:
(a) goodwill related to an associate or to a jointly controlled entity must be included in the carrying amount of the investment and its amortization is not permitted; (b) any excess of the investor’s interest in the net fair value of the identifiable assets and liabilities of the investee over the cost of the investment must be included as revenue in determining the investor’s interest in the results of the investee in the period in which the investment is acquired.

Appropriate adjustments must be made after acquisition, in the results of the investee, by the investor, to consider, for example, the depreciation of assets based on their respective fair values at the date of acquisition. Similarly, corrections in the investor’s interest in the results of the investee must be made, after acquisition, due to losses recognized by the investee as a result of the impairment of assets, such as, for example, for goodwill or for property, plant and equipment.

The most recent financial statements of the associate or of the jointly controlled entity must be used for the application of the equity method. When the end of the fiscal year of the investor is different from that of the investee, the latter must prepare, for use by the investor, financial statements on the same date as the investor’s financial statements, unless this is impracticable.
In accordance with item 33, when the financial statements of the investee used for the application of the equity method are of a date different from the date used by the investor, pertinent adjustments must be made due to the effects of significant transactions and events that occur between that date and the date of the investor’s financial statements. Regardless of this, the maximum lag between the closing dates of the investee’s and the investor’s statements must not exceed three months. The duration of the periods covered in the financial statements and any difference between their respective closing dates must be the same from one period to another.
The investor’s financial statements must be prepared using uniform accounting practices for events and transactions of the same nature in similar circumstances.
Except as described in item 36A, if the investee uses accounting practices different from those adopted by the investor in events and transactions of the same nature in similar circumstances, necessary adjustments must be made to adapt the investee’s financial statements to the investor’s accounting practices when using them for the application of the equity method.

36A. Without prejudice to the provisions of item 36, if the entity, which is not itself an investment entity, has an interest in an associate or in a jointly controlled entity that is an investment entity, the entity may, in the application of the equity method, elect to maintain the fair value measurement, applied by the associate or by the jointly controlled entity, in its subsidiaries. This choice must be made separately for each associate or jointly controlled entity that is an investment entity, for the earliest date on which:
(a) the associate or jointly controlled entity that is an investment entity was initially recognized; (b) the associate or jointly controlled entity becomes an investment entity; and (c) the associate or jointly controlled entity that is an investment entity becomes a controller for the first time.

If the investee has preferred shares with cumulative dividend rights in circulation that are held by parties other than the investor, which are classified as part of equity, the investor must calculate its interest in the investee’s period results after adjusting it by deducting the dividends pertinent to these shares, regardless of whether they have been declared or not.
When the investor’s interest in the losses of the associate or of the jointly controlled entity equals or exceeds the carrying balance of its interest in the investee, the investor must discontinue the recognition of its interest in additional losses. The interest in the investee must be the carrying amount of the investment in this investee, evaluated by the equity method, together with some long-term interest that, in essence, constitutes part of the investor’s total net investment in the investee. For example, a component, whose liquidation is not planned, nor is it likely to occur in the foreseeable future, is, in essence, an extension of the entity’s investment in that investee. Such components may include preferred shares, as well as receivables or long-term loans, but do not include components such as receivables or payables of a commercial nature or any long-term receivables for which there are adequate guarantees, such as secured loans. The loss recognized by the equity method that exceeds the investor’s interest in the ordinary shares of the investor must be applied to the other components that constitute the investor’s interest in the investee in reverse order of residual interest - seniority (i.e., priority in liquidation).
After reducing, to zero, the carrying balance of the investor’s interest, additional losses must be considered, and a liability must be recognized, only to the extent that the investor has incurred legal or constructive (unformalized) obligations or has made payments on behalf of the investee. If the investee subsequently reports profits, the investor must resume the recognition of its interest in these profits only after the point at which the portion of these subsequent profits attributable to it equals its interest in the unrecognized losses.

Impairment losses
40. After the application of the equity method, including the recognition of the losses of the associate or of the jointly controlled entity in accordance with the provisions of item 38, the entity must apply items 41A to 41C to determine if there is any objective evidence that its net investment in an associate or in a jointly controlled entity is not recoverable (impaired).

(Eliminated)

41A. The net investment in an associate or in a jointly controlled entity presents recovery problems and impairment losses are incurred if, and only if, there is objective evidence of the reduction in its recoverable amount as a result of one or more events that have occurred after the initial recognition of the net investment (loss event), and this event (or events) of loss has an impact on the estimated future cash flows of the net investment, which can be estimated reliably. It may not be possible to identify a single and distinct event that has caused the reduction in the recoverable amount. Instead, the combined effect of several events may have caused the reduction in the recoverable amount. Expected losses as a result of future events, regardless of their probability, must not be recognized. Objective evidence that the net investment presents recovery problems includes observable data, which are brought to the attention of the entity regarding the following loss events:
(a) significant financial difficulty of the associate or of the jointly controlled entity; (b) breach of contract, such as, for example, default or delay in payments by the associate or by the jointly controlled entity; (c) the entity, for economic or legal reasons, related to the financial difficulty of its

an associate or a jointly controlled enterprise, gives the associate or the jointly controlled enterprise a concession that the entity would not otherwise consider; (d) it becomes probable that the associate or the jointly controlled enterprise will enter into bankruptcy or undergo other financial reorganization; or (e) disappearance of an active market for the net investment, due to financial difficulties of the associate, or of the jointly controlled enterprise.

41B. The disappearance of an active market because the financial or equity instruments of the associate, or of the jointly controlled enterprise, ceased to be publicly traded is not evidence of impairment. A downgrade in credit rating or a decrease in the fair value of the associate, or of the jointly controlled enterprise does not, in itself, represent evidence of impairment, although it may be evidence of impairment when considered with other available information.

41C. In addition to the types of events in item 41A, objective evidence of impairment of the net investment in the equity instruments of the associate or of the jointly controlled enterprise includes information about significant adverse changes that have occurred in the technological, market, economic, or legal environment in which the associate or the jointly controlled enterprise operates, and indicates that the cost of the investment in the equity instrument may not be recoverable. A significant or prolonged decrease in the fair value of an investment in an equity instrument below its cost is also objective evidence of impairment.

Since goodwill (future profitability expectation goodwill) is part of the carrying amount of the net investment in the investee and is not recognized separately, it should not be tested separately for its recoverable amount. Instead, the total carrying amount of the investment must be tested as a single asset, in accordance with the provisions of CPC 01 – Impairment of Assets, by comparing its carrying amount with its recoverable amount (the higher of fair value less costs to sell or value in use), whenever the application of items 41A to 41C indicates that the net investment may be impaired. The impairment loss recognized in these circumstances should not be allocated to any asset that constitutes part of the carrying amount of the net investment in the investee, including goodwill. Consequently, the reversal of these losses must be recognized in accordance with CPC 01, to the extent of any subsequent increase in the recoverable amount of the net investment.

In determining the value in use of the net investment, the entity must estimate:
(a) its share of the present value of future cash flows expected to be generated by the investee, including the cash flows from the investee's operations and the expected residual value upon disposal of the investment; or (b) the present value of future cash flows expected based on the receipt of dividends from the investment and the expected residual value upon disposal of the investment.

Under appropriate assumptions, the above methods should produce the same result.

The recoverable amount of an investment in an associate or in a jointly controlled enterprise must be determined for each investment, unless the associate or the jointly controlled enterprise does not generate cash inflows continuously that are largely independent of those generated by other assets of the entity.

Separate Financial Statements

The investment in an associate or in a jointly controlled enterprise must be accounted for in the investor's separate financial statements in accordance with the provisions of item 10 of Technical Pronouncement CPC 35 – Separate Financial Statements.

Transitional Provisions

45 to 45F. (Eliminated)

45G. The entity must apply the changes in items 14A and 41 retrospectively, in accordance with CPC 23, for annual reporting periods beginning on January 1 of the year the changes enter into force, except as specified in items 45H to 45K.

45H. An entity that applies for the first time the changes described in item 45G at the same time it applies for the first time CPC 48 must apply the transition requirements, specified in CPC 48, to the long-term interests described in item 14A.

45I. An entity that applied for the first time the changes described in item 45G, after the first application of CPC 48, must apply the transition requirements of CPC 48 necessary for the application of the requirements established in item 14A to the long-term interests. For this purpose, references to the date of initial application of CPC 48 must be read as referring to the beginning of the annual reporting period in which the entity applies the changes for the first time (the date of initial application of the changes). The entity is not required to restate prior periods to reflect the application of the changes. The entity may restate prior periods only if it is possible without the use of hindsight.

45J. When applying for the first time the changes described in item 45G, an entity that applies the temporary exemption of CPC 48, in accordance with insurance contracts of CPC 11, is not required to restate prior periods to reflect the application of the changes. The entity may restate prior periods only if it is possible without the use of hindsight.

45K. If the entity does not restate prior periods, applying item 45I or item 45J, on the date of initial application of the changes, it must recognize in retained earnings (or another component of equity, as appropriate) any difference between:
(a) the previous carrying amount of the long-term interests described in item 14A on that date;

and
(b) the carrying amount of these long-term interests on that date.

(Eliminated)
This pronouncement replaces CPC 18 (R2) – Investment in Associate, Controlled Entity, and Jointly Controlled Enterprise, approved by the Accounting Pronouncements Committee on December 7, 2012.

Lineage: No known changes

Timeline

What changed in the obligations

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