CVM Resolution No. 75 of March 22, 2022 — CVM — BR

SECURITY AND EXCHANGE 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.gov.br/cvm

CVM RESOLUTION NO. 75, OF MARCH 22, 2022
Approves the Consolidation of Technical Pronouncement CPC 37(R1), of the Accounting Pronouncements Committee, which deals with the initial adoption of international accounting standards.

THE PRESIDENT OF THE SECURITY AND EXCHANGE COMMISSION OF BRAZIL - CVM makes public that the Board, in a meeting held on December 1, 2021, based on §§ 3 and 5 of art. 177 of Law No. 6,404, of December 15, 1976, combined with items II and IV of § 1 of art. 22 of Law No. 6,385, of December 7, 1976, as well as arts. 5 and 14 of Decree No. 10,139, of November 28, 2019, APPROVED the following Resolution:

Art. 1. It is made mandatory for publicly-held companies the Technical Pronouncement CPC 37(R1), which deals with the initial adoption of international accounting standards, issued by the Accounting Pronouncements Committee - CPC, as consolidated in Annex “A” to this Resolution.

Art. 2. CVM Deliberation No. 647, of December 2, 2010, is 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. 75, OF MARCH 22, 2022
ANNEX “A”

ACCOUNTING PRONOUNCEMENTS COMMITTEE
TECHNICAL PRONOUNCEMENT CPC 37 (R1)
FIRST-TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS Correlation to International Financial Reporting Standards – IFRS 1 (BV2010)

Summary Item
INTRODUCTION IN1 – IN9
OBJECTIVE 1
SCOPE 2 – 5
RECOGNITION AND MEASUREMENT 6 – 19
Opening IFRS statement of financial position 6 Accounting policies 7 – 12 Exceptions to retrospective application of other IFRSs 13 – 17 Estimates 14 – 17 Exemptions from other IFRSs 18 – 19 PRESENTATION AND DISCLOSURE 20 – 33 Comparative information 21 – 22 Comparative information and divergent historical summaries from IFRSs 22 Explanation of the transition to IFRSs 23 – 33 Reconciliations 24 – 28 Designation of financial assets or financial liabilities 29 – 29A Use of deemed cost for property, plant and equipment and investment property 30 Use of deemed cost for intangible assets, investments in subsidiaries, joint ventures and associates and other assets Use of deemed cost for oil and gas assets 31A Interim financial statements 32 – 33 EFFECTIVE DATE 34 – 39B SPECIAL PROVISION 40
APPENDIX A – Glossary of terms used in the Pronouncement
APPENDIX B – Exceptions to the retrospective application of other IFRSs

CVM RESOLUTION NO. 75, OF MARCH 22, 2022
APPENDIX C – Exemptions for business combinations
APPENDIX D – Exemptions from other IFRSs
APPENDIX E – (Eliminated)
IMPLEMENTATION GUIDE
EXPLANATORY NOTE TO THE PRONOUNCEMENT

Introduction
IN1. Many Brazilian companies are required to adopt, by requirement of various Brazilian accounting regulatory bodies, from 2010, the International Accounting Standards issued by the IASB – International Accounting Standards Board (International Financial Reporting Standards – IFRSs) in their consolidated financial statements.

IN2. As some of these standards have the consequence of retrospective adjustments, the IASB issued its IFRS 1 – First-time Adoption of International Financial Reporting Standards, which aims to regulate the situation when the entity applies the Standards internationally for the first time. This standard was taken as the basis for the preparation of this Pronouncement, so that the consolidated statements can be declared by the company's management as being in conformity with the International Accounting Standards issued by the IASB (hereinafter referred to simply as IFRSs).

IN3. This Technical Pronouncement must be applied when the entity adopts IFRSs for the first time through an explicit and unreserved declaration of compliance with IFRSs.

IN4. In general, this Technical Pronouncement requires the entity to comply with each IFRS in effect at the end of its first reporting period in accordance with IFRSs. In particular, the Pronouncement requires the entity to do the following in its opening IFRS statement of financial position:
(a) recognize all assets and liabilities whose recognition is required by IFRSs; (b) not recognize items as assets and liabilities if such recognition is prohibited by IFRSs; (c) reclassify items recognized in accordance with the set of accounting policies it had been following as a type of asset, liability or component of equity, but which are a different type of asset, liability or component of equity in accordance with IFRSs; and (d) apply IFRSs in the measurement of all recognized assets and liabilities.

IN5. This Technical Pronouncement grants limited exemptions from these requirements in specific areas where the cost of complying with them would likely exceed the benefits to users of the financial statements. It also prohibits the retrospective application of IFRSs in some areas, particularly where retrospective application would require management judgments about past conditions after the result of a specific operation is already known.

IN6. This Technical Pronouncement requires disclosures that explain how the transition from the accounting policies that had been followed to IFRSs affected the financial position (statement of financial position), financial performance (profit and loss and other comprehensive income) and cash flows of the entity.

IN7. It is important to remember that, in order to state that the consolidated financial statements are in conformity with the International Accounting Standards issued by the IASB, it is mandatory to always adopt all documents issued by that entity, even when not yet issued by this Committee. In this Pronouncement, the documents issued by this Committee corresponding to the standards issued by the IASB are mentioned.

IN8. Attention is called to item 40 of this Pronouncement, where certain alternatives given by the IASB for the case of consolidated statements in Brazil are limited; other limitations are contained in other items of this same Pronouncement. As provided by the IASB itself, the limitation of existing alternatives in IFRSs is not a hindering factor for the financial statements prepared to be considered as being in accordance with IFRSs.

IN9. Finally, this Committee recalls the content of the Basic Conceptual Pronouncement Framework for the Preparation and Presentation of Financial Statements and the Technical Pronouncement CPC 26 – Presentation of Financial Statements. They correspond to the content in the IASB documents Framework for the Preparation and Presentation of Financial Statements and IAS 1 – Presentation of Financial Statements, where the continuous obedience to the prevalence of substance over form is expressed and repeatedly required. And this to the point that, if the adoption of any Pronouncement, Interpretation or Guidance causes deformation of the financial statements to such an extent that the actual reality is not properly presented, the entity must not apply this document, in whole or in part, replacing it with the procedure judged more appropriate to the situation so that the financial statements achieve their objective. The procedures, including substantiation and disclosure, related to this situation which is expected to be extremely rare, must be properly disclosed as cited in item 19 of Technical Pronouncement CPC 26.

Objective

The objective of this Pronouncement is to ensure that the first financial statements of an entity in accordance with the International Accounting Standards issued by the IASB – International Accounting Standards Board, hereinafter referred to as IFRSs – International Financial Reporting Standards, and the interim financial statements for the partial periods covered by these financial statements contain high-quality information that:
(a) are transparent to users and comparable with respect to all periods presented; (b) provide an appropriate starting point for accounting in accordance with IFRSs; and (c) can be generated at a cost that does not exceed the benefits.

Scope
2. The entity must apply this Pronouncement:
(a) in its first IFRS financial statements; and (b) in all interim statements, if any, presented in accordance with IAS 34 – Interim Financial Reporting (Technical Pronouncement CPC 21 – Interim Statement) for the period covered by its first IFRS financial statements.

The first IFRS financial statements of an entity are the first annual statements in which the entity adopts IFRSs, explicitly and without reservations, declaring that these statements are in conformity with such IFRSs. The financial statements in accordance with IFRSs are the entity's first financial statements in IFRSs when, for example, the entity:
(a) has presented its most recent previous financial statements:
(i) in accordance with corporate requirements that are not consistent with IFRSs in all aspects; (ii) in conformity with IFRSs in all aspects, except for the fact that these statements do not contain an explicit and unreserved declaration that they are in accordance with IFRSs; (iii) contain an explicit declaration of conformity with some, but not all, IFRSs; (iv) in accordance with national requirements, inconsistent with IFRSs, using in isolation some international standard to account for items for which there are no specific national requirements; or (v) in conformity with national requirements, but with reconciliation of some values with respect to those determined in accordance with IFRSs; (b) has prepared financial statements in accordance with IFRSs only for internal use, without making them available to the owners of the entity or other external users; (c) has prepared a set of financial statements in accordance with IFRSs for consolidation purposes, but which is not the complete set of financial statements prepared in accordance with IAS 1 – Presentation of Financial Statements (Technical Pronouncement CPC 26 – Presentation of Financial Statements); (d) has not presented financial statements for previous periods.
This Pronouncement must be applied when the entity adopts IFRSs for the first time. This Pronouncement must not be applied, for example, when the entity:
(a) has ceased presenting financial statements in accordance with corporate requirements, having previously presented them as well as another set of financial statements that contained an explicit and unreserved declaration of conformity with IFRSs; (b) has presented financial statements in previous years in accordance with corporate requirements in which there was an explicit and unreserved declaration of conformity with IFRSs; or (c) has presented financial statements in previous years in which there was an explicit and unreserved declaration of conformity with IFRSs, regardless of whether the auditors qualified the audited statements.

4A. Regardless of the requirements of items 2 and 3, the entity that has applied IFRSs in its previous financial statements, but whose most recent financial statement does not contain an explicit and unreserved declaration that these statements are in conformity with IFRSs, must apply this Technical Pronouncement or, alternatively, apply IFRSs retrospectively in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (Technical Pronouncement CPC 23 – Accounting Policies, Change in Estimate and Correction of Error).

4B. When the entity does not elect to apply this Technical Pronouncement in accordance with item 4A, it must adopt the disclosure requirements of items 23A and 23B of this Technical Pronouncement in addition to the requirements of IAS 8 (CPC 23).

This Pronouncement is not applicable to changes in accounting policies made by an entity that already applies IFRSs. In this case, such changes are subject to:
(a) requirements relating to changes in accounting policies in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (Technical Pronouncement CPC 23 – Accounting Policies, Change in Estimate and Correction of Error); and (b) specific transitional requirements contained in other IFRSs.

Recognition and measurement
Opening IFRS statement of financial position
6. The entity must prepare and present the opening IFRS statement of financial position at the date of transition to IFRSs. This is the starting point of its accounting in conformity with IFRSs.

Accounting policies
7. The entity must use the same accounting policies to present its opening IFRS statement of financial position and for all periods presented in its first IFRS financial statements. These accounting policies must be in accordance with all IFRSs in effect at the end of the first IFRS reporting period, except as specified in items 13 to 19 and in Appendices B to D of this Pronouncement.

The entity must not apply different versions of IFRSs in effect. The entity may apply a new IFRS, not yet mandatory, only when this IFRS allows its early application.

8A. In addition to what is provided in item 8, the early application of a new IFRS is conditioned on the fact that this new IFRS, not yet mandatory, has been admitted by the Accounting Pronouncements Committee and, when applicable, conditioned on prior approval by the regulatory body to which the entity is subordinate, when that body requires the adoption of IFRSs for regulated entities.

Example: Consistent application of the latest version of an IFRS Context The closing of the first IFRS reporting period of entity “A” is December 31, 2010. Entity “A” decides to present comparative information for only one year (see item 21). Therefore, its date of transition to IFRSs is the opening of the fiscal year on January 1, 2009 (or equivalently, the closing of the fiscal year on December 31, 2008). Entity “A” presented its annual financial statements under the accounting practices adopted in Brazil and by this CPC for December 31 of each year, including December 31, 2009.

Application of requirements
Entity “A” is required to apply IFRSs in effect for periods ending on December 31, 2010, in the preparation and presentation of:
(a) its opening IFRS statement of financial position of January 1, 2009; (b) its annual financial statements for the fiscal year ending on December 31, 2010 (with comparative information of 2009), including the statement of financial position, the statement of profit or loss, the statement of comprehensive income, the statement of changes in equity, the statement of value added (if required by a regulatory body or presented spontaneously) and the statement of cash flows of December 31, 2010 (with comparative information of 2009) and respective explanatory notes (with comparative information of 2009).

If a new IFRS is not yet mandatory, but allows its early application, entity “A” may, but is not obliged to, apply this new IFRS in its first IFRS financial statements, provided it also meets the requirement of item 8A.

The transitional provisions in other IFRSs are applicable to changes in accounting policies made by the entity that already uses IFRSs and such transitional provisions are not applicable in the transition to IFRSs by a first-time adopter, except as specified in Appendices B to D.
Except as described in items 13 to 19 and in Appendices B to D, the entity must, in its opening IFRS statement of financial position:
(a) recognize all assets and liabilities whose recognition is required by IFRSs; (b) not recognize items as assets or liabilities when IFRSs do not permit such recognition; (c) reclassify items recognized in accordance with previous accounting practices as a certain type of asset, liability or component of equity, which, according to IFRSs, constitute a different type of asset, liability or component of equity; and (d) apply IFRSs in the measurement of all recognized assets and liabilities.
The accounting policies that the entity uses in its opening IFRS statement of financial position may be different from those used for the same date by previous accounting practices. The resulting adjustments arise from events and transactions prior to the transition date to the

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. 75, OF MARCH 22, 2022

IFRSs. Therefore, the entity must recognize these adjustments directly in accumulated profits or losses (or, if appropriate, in another equity account) on the date of transition to IFRSs.

This Pronouncement establishes two categories of exceptions to the principle that the entity’s opening IFRS balance sheet must be in compliance with all IFRSs:
(a) items 14 to 17 and Appendix B prohibit the retrospective application of certain aspects of other IFRSs; (b) Appendices C and D exempt compliance with certain requirements of other IFRSs.

Exceptions to the retrospective application of other IFRSs

This Pronouncement prohibits the retrospective application of certain aspects of other IFRSs. These exceptions are contained in items 14 to 17 and Appendix B.

Estimates

The entity’s estimates in accordance with IFRSs, at the date of transition to IFRSs, must be consistent with the estimates made for the same date under previous accounting standards (after necessary adjustments to reflect any difference in accounting policy), unless there is objective evidence that those estimates were wrong.
The entity may receive information after the date of transition to IFRSs about estimates made under previous accounting standards. In accordance with item 14, the entity must treat the receipt of this information in the same manner as it would treat subsequent events that do not require accounting adjustments in compliance with IAS 10 – Events after the Reporting Period (Technical Pronouncement CPC 24 – Subsequent Event). For example, assume that the date of transition to IFRSs for an entity is January 1, 2009, and new information, obtained on July 15, 2009, requires a revision of the estimate made on December 31, 2008, under previous accounting standards. The entity must not reflect that new information in its opening IFRS balance sheet (unless it is necessary to adjust the estimate due to a difference in accounting policy or if there is objective evidence that that estimate is wrong). Instead, the entity must reflect that new information in the result of the period ending on December 31, 2009 (or, when appropriate, as comprehensive income, in equity).
The entity may need to make estimates in accordance with IFRSs at the date of transition to IFRSs that were not required on that date under previous accounting standards. To be consistent with IAS 10 (Technical Pronouncement CPC 24 – Subsequent Event), IFRS estimates must reflect the conditions that existed at the date of transition to IFRSs. In particular, estimates of market prices, interest rates, or exchange rates at the date of transition to IFRSs must reflect the market conditions of that date.
Items 14 to 16 must be applied to the opening IFRS balance sheet. They must also be applied to the comparative period presented in the entity’s first IFRS financial statements, in which case references to the date of transition to IFRSs must be replaced by references to the end of that comparative period.

Exemptions from other IFRSs

The entity may opt to use one or more exemptions contained in Appendices C and D, but must not apply such exemptions to other items by analogy.
(Eliminated).

Presentation and disclosure

This Pronouncement does not provide exceptions to presentation and disclosure requirements required in other IFRSs.

Comparative information

The entity’s first IFRS financial statements must include at least three balance sheets, two statements of profit or loss, two statements of cash flows, two statements of changes in equity, two statements of comprehensive income, two statements of value added (if required by the regulator or presented voluntarily), and the respective explanatory notes, including comparative information for all statements presented.

Comparative information and historical summaries divergent from IFRSs

Some entities present historical summaries of specific data for periods prior to the one in which they first presented full comparative information in accordance with IFRSs. This Pronouncement does not require such summaries to comply with the recognition and measurement requirements of IFRSs. In addition, some entities present comparative information in accordance with previous accounting standards as well as the comparative information required by IAS 1 (Technical Pronouncement CPC 26 – Presentation of Financial Statements). In financial statements containing historical summaries or comparative information in accordance with previous accounting standards, the entity must:
(a) prominently label the information generated by previous accounting standards as not being prepared in accordance with IFRSs; and (b) disclose the nature of the main adjustments that would be made in accordance with IFRSs. The entity does not need to quantify these adjustments.

Explanation of the transition to IFRSs

The entity must explain how the transition from previous accounting standards to IFRSs affected its disclosed financial position (balance sheet), as well as its economic performance (statement of profit or loss) and financial performance (statement of cash flows).

23A. An entity that adopted IFRSs in a prior period, as described in item 4A, must disclose:
(a) the reason for ceasing to apply IFRSs; and (b) the reason for resuming the application of IFRSs.

23B. When the entity, in accordance with item 4A, decides not to apply IFRS 1, it must explicitly state the reasons for deciding to apply IFRSs as if it had never ceased to apply them.

Reconciliations

To comply with item 23, the entity’s first IFRS financial statements must include:
(a) reconciliations of equity disclosed under previous accounting standards to equity in accordance with IFRSs for the following dates:
(i) the date of transition to IFRSs; and
(ii) the end of the last period presented in the entity’s most recent annual financial statements under previous accounting standards; (b) the reconciliation of profit or loss in accordance with IFRSs for the last period presented in the entity’s most recent annual financial statements. The starting point for this reconciliation must be the profit or loss under previous accounting standards for the same period. If a statement of comprehensive income was disclosed, the same applies to it; (c) if the entity recognized or reversed any impairment loss in its first preparation of the opening IFRS balance sheet, the explanatory notes that IAS 36 – Impairment of Assets (Technical Pronouncement CPC 01 – Impairment of Assets) would have required if the entity had recognized such losses or reversals in the period starting on the date of transition to IFRSs.
The reconciliations required by items 24(a) and (b) must provide sufficient detail to allow users to understand the relevant adjustments in the balance sheet and the statement of profit or loss. If the entity has presented the statement of cash flows under previous accounting standards, it must also explain the relevant adjustments in the statement of cash flows.
If the entity realizes that errors occurred under previous accounting standards, the reconciliations required by item 24(a) and (b) must distinguish the correction of these errors from changes in accounting policies.
IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (Technical Pronouncement CPC 23 – Accounting Policies, Change in Estimate and Correction of Error) does not address changes in accounting policies that occur when the entity adopts IFRSs for the first time. Therefore, the disclosure requirements provided in IAS 8 (Technical Pronouncement CPC 23) regarding changes in accounting policies must not be applied in the entity’s first IFRS financial statements.

27A. If, during the period relating to the first IFRS financial statements, the entity changes its accounting policies or the use of exemptions contained in this Technical Pronouncement, it must explain the changes between its first interim IFRS financial report and its first IFRS financial statements, as per item 23, and must update the reconciliations required by item 24(a) and (b).

If the entity has not presented financial statements for prior periods, its first IFRS financial statements must disclose such fact.

Designation of financial assets or financial liabilities

The entity may designate a previously recognized financial asset as a financial asset measured at fair value through profit or loss in accordance with item D19A. The entity must disclose the fair value of financial assets so designated at the date of designation and their classification and carrying amount in the prior financial statements.

29A. The entity may designate a previously recognized financial liability as a financial liability at fair value through profit or loss in accordance with item D19. The entity must disclose the fair value of financial liabilities so designated at the date of designation and their classification and carrying amount in the prior financial statements.

Use of deemed cost for property, plant and equipment and investment property

When the entity uses, in its financial statements under Brazilian accounting practice, the deemed cost, in compliance with Technical Interpretation ICPC 10 – Interpretation on the Initial Application to Property, Plant and Equipment and Investment Property of Technical Pronouncements CPCs 27, 28, 37 and 43, it must use such values in its opening IFRS balance sheet for property, plant and equipment, for investment property, or for right-of-use assets (see items D5 and D7). The following must be disclosed for each line in the opening balance sheet under this pronouncement:
(a) the sum of those fair values; and
(b) the sum of adjustments made to the carrying amount of items disclosed under previous accounting standards.

Use of deemed cost for intangible assets, investments in subsidiaries, jointly controlled entities and associates and other assets

Accounting practices adopted in Brazil and by this CPC do not permit the use of deemed cost for intangible assets, investments in subsidiaries, jointly controlled entities, associates, or other assets that are not property, plant and equipment and investment property.
(a) (eliminated);
(b) (eliminated);
(c) (eliminated).

Use of deemed cost for oil and gas assets

31A. If the entity uses the exception contained in item D8A(b) for oil and gas assets, it must disclose the fact and the basis under which the carrying amounts determined under previous standards were allocated.

Use of deemed cost for regulated rate operations

31B. If the entity uses the exemption in item D8B for regulated rate operations, it must disclose this fact and the basis on which the carrying amounts were determined in accordance with accounting practices prior to the application of IFRSs.

Use of deemed cost after severe hyperinflation

31C. If the entity decides to measure assets and liabilities at fair value and use that fair value as deemed cost in its opening IFRS financial statement, due to severe hyperinflation (see items D26 to D30), the first IFRS financial statements will disclose an explanatory note on how, and why, the entity had, and subsequently ceased to have, a functional currency that possessed both of the following characteristics:
(a) a reliable general price index is not available for entities with transactions and balances in the currency.
(b) there is no convertibility between the currency and a foreign currency considered stable.

Interim financial statements

To comply with item 23, when the entity presents its interim financial statements, in accordance with IAS 34 – Interim Financial Reporting (Technical Pronouncement CPC 21 – Interim Reporting) for the part of the period covered by its first IFRS financial statements, the entity must additionally meet, beyond what is required by IAS 34 (Technical Pronouncement CPC 21), the following requirements:
(a) if the entity has interim financial statements for the comparable interim period of the immediately preceding fiscal year, each interim disclosure must include:
(i) the reconciliation of equity under previous accounting standards at the end of that comparable interim period to equity under IFRSs, on that date; and (ii) the reconciliation of profit or loss in accordance with IFRSs for that comparable interim period (current date and year). The starting point for this reconciliation must be the profit or loss under previous accounting standards for that period or, when the entity does not present it in total, the profit or loss of the period under previous accounting standards. The same applies to the statement of comprehensive income; (b) in addition to the reconciliation required in item 32(a), the entity’s first interim financial statements in accordance with IAS 34 (Technical Pronouncement CPC 21) for the part of the period covered by its first IFRS financial statements must include the reconciliations described in item 24(a) and (b) (supplemented by the details required by items 25 and 26) or must include a cross-reference to another published document that includes these reconciliations. (c) if the entity changes its accounting policies or its use of exemptions contained in this Technical Pronouncement, it must explain the changes in each of the interim financial statements in accordance with item 23 and must update the reconciliations required in items (a) and (b).
IAS 34 (Technical Pronouncement CPC 21) requires a minimum of disclosures which are based on the premise that users of interim financial statements have access to the entity’s most recent annual financial statements. However, IAS 34 (Technical Pronouncement CPC 21) also requires the entity to disclose any events or transactions that are relevant to the understanding of the current interim period. Therefore, when a first-time adopter has not disclosed, in its most recent annual financial statements under previous accounting standards, information relevant to the understanding of the current interim period, that interim financial statement must disclose such information, or else must include a cross-reference to another published document that includes such information.

Effective date

The entity must apply this Pronouncement to its first consolidated financial statements prepared in accordance with IFRSs for the fiscal year beginning on or after January 1, 2010. Early application is permitted.

34A. In the case of entities that have disclosed their consolidated financial statements for the fiscal year ended before January 1, 2009, prepared in accordance with IFRSs, but in disagreement with the provisions of item 40 of this Pronouncement, they must restrict their divergences only to those practiced up to those statements, providing full disclosure of these practices and their effects. New divergent procedures must not be adopted. Since the objective of this provision is to assist the comparability of IFRS financial statements for Brazilian purposes, if regulatory bodies determine the reduction or elimination of these divergences, the statements thus adjusted will continue to be in compliance with this Pronouncement.

The effective dates of Technical Pronouncements, Interpretations, and Guidelines of this CPC that do not conflict with those of the IASB apply to consolidated financial statements prepared in accordance with IFRSs, including with respect to the retroactive application of their effects to comparative statements. For example, the requirements of IAS 23 – Borrowing Costs (Technical Pronouncement CPC 20 – Borrowing Costs) apply to 2010 consolidated statements and 2009 comparative statements, even if IFRS 1 allows non-retroactive application of this standard to 2009, if the Brazilian regulator has determined such retroactive application for statements under Brazilian legislation and this CPC.

36-39S. (Eliminated).

39AG. CPC Revision 19, approved by the CPC on October 1, 2021, amended item D1(f), renumbered item D13A, and added a new item D13A. The effective date of this Revision must be established by the regulatory bodies that approve it, and, for full compliance with international accounting standards, the entity must apply these amendments for annual periods beginning on or after January 1, 2022.

Special provision

Consolidated IFRS financial statements governed by this Pronouncement must follow the same accounting policies and practices that the entity uses in its statements under Brazilian accounting practice, unless there is a conflict between them and the use of stipulations by IFRSs is prohibited in statements under Brazilian accounting practice. In the case of alternative accounting policies in IFRS standards as well as in this CPC, the entity must observe in IFRS consolidated statements the same ones used for statements under this CPC, as is the case of the choice between cost or fair value measurement for investment properties. In the case of alternatives in IFRS standards, but no alternative under this CPC, in IFRS consolidated statements, the alternative determined by this CPC must be followed, among those permitted by IFRSs, as is the case of the obligation to use the statement of profit or loss and the statement of comprehensive income, instead of both in a single statement. In the case of no alternative in statements under this CPC by legal imposition, such as the voluntary revaluation of assets, the use of this alternative is also prohibited in IFRS consolidated financial statements.

COMMISSION ON SECURITIES AND EXCHANGE (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.gov.br/cvm

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

Appendix A – Glossary of terms used in the Pronouncement
This appendix is an integral part of this Pronouncement.

Transition date to IFRSs is the beginning of the first period for which the entity presents complete comparative information under IFRSs in its first IFRS financial statements.

Attributed cost is the amount used as a substitute for cost (or depreciated cost or amortized cost) at a certain date. In subsequent depreciation and amortization, it is admitted that the entity initially recognized the asset or liability at that date at a cost equal to the attributed cost.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (see Technical Pronouncement CPC 46).

First IFRS financial statements are the first annual financial statements in which the entity adopts IFRSs through an explicit and unreserved statement of compliance with IFRSs.

First IFRS reporting period is the last period covered by the entity's first IFRS financial statements.

First-time adopter is an entity that presents its first IFRS financial statements.

International Financial Reporting Standards (IFRSs) are standards and interpretations adopted by the IASB (International Accounting Standards Board) and they comprise the International Financial Reporting Standards (IFRSs) issued by the IASB, the International Accounting Standards (IASs) issued by its predecessor, the IASC (International Accounting Standards Committee), and the Interpretations developed by the IFRIC (International Financial Reporting Interpretations Committee) and its predecessor, the SIC (Standing Interpretations Committee).

Opening IFRS balance sheet is the entity's balance sheet at the date of transition to IFRSs.

Previous accounting criteria are the accounting basis that a first-time adopter used immediately before adopting IFRSs.

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

Appendix B – Exceptions to the retrospective application of other IFRSs
This appendix is an integral part of this Pronouncement.

B1. The entity must apply the following exceptions:
(a) derecognition of financial assets and financial liabilities (items B2 and B3); (b) hedge accounting (items B4 to B6); (c) non-controlling interests (item B7); (d) classification and measurement of financial assets (items B8 to B8C); (e) impairment of financial assets (items B8D to B8G); (f) embedded derivatives (item B9); and (g) government loans (items B10 to B12).

Derecognition of financial assets and financial liabilities B2. Except as permitted by item B3, the first-time adopter must apply the derecognition required by IFRS 9 (CPC 48 – Financial Instruments) prospectively for transactions that occurred on or after January 1, 2004. In other words, if the first-time adopter derecognized a non-derivative financial asset or a non-derivative financial liability, in accordance with its previous accounting criteria, due to a transaction that occurred before January 1, 2004, it must not recognize those assets or liabilities in accordance with IFRSs (unless they qualify for recognition as a result of a subsequent transaction or event).

B3. Notwithstanding item B2, the entity may apply the derecognition requirements of IFRS 9 (CPC 48) retrospectively from the date it chooses, provided that the information necessary to apply IFRS 9 (CPC 48) to financial assets and liabilities derecognized as a result of past operations was obtained at the date of initial recognition of those operations.

Hedge accounting
B4. As required in IFRS 9 (CPC 48), at the date of transition to IFRSs the entity must:
(a) measure all derivatives at fair value; and (b) eliminate all deferred asset losses and deferred liability gains that originated from derivatives disclosed in accordance with previous accounting criteria.

B5. The entity must not incorporate in its opening IFRS balance sheet hedge linkages of the type that do not qualify as hedge accounting under IFRS 9 (CPC 48) (for example, hedge linkages where the hedging instrument is the option sold separately or the net option sold or when the hedge is the net position in a cash flow hedge for a risk other than currency risk). However, if the entity designated the net position as a hedged item in accordance with previous accounting criteria, it may designate an individual item within that net position as a hedge in accordance with IFRSs, or the net position if it meets the requirements in item 6.6.1 of CPC 48, provided that it does so by the date of transition to IFRSs.

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

B6. If, before the date of transition to IFRSs, the entity had designated the transaction as a hedge, but that hedge does not meet the conditions provided in IFRS 9 (CPC 48) for hedge accounting, the entity must apply the provisions of items 6.5.6 and 6.5.7 of IFRS 9 (CPC 48) to discontinue such hedge accounting. Transactions effected before the date of transition to IFRSs must not be designated retrospectively as hedges.

Non-controlling interests
B7. A first-time adopter must apply the following requirements of IFRS 10 Consolidated Financial Statements (Technical Pronouncement CPC 36 – Consolidated Financial Statements) prospectively from the date of transition to IFRSs:
(a) the provision in item B94 of Technical Pronouncement CPC 36, whereby comprehensive income is attributed to the owners of the parent and to non-controlling interests regardless of whether this results in a negative non-controlling interest (debit balance); (b) the provisions in items 23 and B94 regarding the accounting for changes in the parent's relative interest in a subsidiary that do not result in the loss of control; and (c) the provisions in items B97 to B99 regarding the accounting for the loss of control over a subsidiary and the related requirements provided in item 8A of IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations (Technical Pronouncement CPC 31 – Non-current Assets Held for Sale and Discontinued Operations).

However, if the first-time adopter decides to apply IFRS 3 (Technical Pronouncement CPC 15 – Business Combinations) retrospectively to past business combinations, it must apply IFRS 10 (Technical Pronouncement CPC 36) in the same manner in accordance with item C1 of this Technical Pronouncement.

Classification and measurement of financial assets B8. The entity must determine whether the financial asset meets the classification conditions of item 4.1.2 or item 4.1.2A of IFRS 9 (CPC 48) based on the facts and circumstances existing at the date of transition to IFRSs.

B8A. If it is impracticable to assess the time value of money modified element in accordance with items B4.1.9B to B4.1.9D of IFRS 9 (CPC 48), based on the facts and circumstances existing at the date of transition to IFRSs, the entity must assess the characteristics of the contractual cash flows of that financial asset based on the facts and circumstances existing at the date of transition to IFRSs, without taking into account the requirements regarding the modification of the time value of money element in items B4.1.9B to B4.1.9D of IFRS 9 (CPC 48). (In this case, the entity must also apply item 42R of CPC 40, but references to item 7.2.4 of IFRS 9 (CPC 48) must be read as referring to this item and references to 'initial recognition of the financial asset' must be read as 'at the date of transition to IFRSs').

B8B. If it is impracticable to assess whether the fair value of a prepayment feature is insignificant in accordance with item B4.1.12(c) of IFRS 9 (CPC 48) based on the facts and circumstances existing at the date of transition to IFRSs, the entity must assess the characteristics of the contractual cash flows of that financial asset based on the facts and circumstances existing at the date of transition to IFRSs, without taking into account the exception for prepayment features in item B4.1.12 of IFRS 9 (CPC 48). (In this case, the entity must also apply item 42S of CPC 40, but references to 'item 7.2.5 of IFRS 9 (CPC 48)' must be read as referring to this item and references to 'initial recognition of the financial asset' must be read as 'at the date of transition to IFRSs').

B8C. If it is impracticable (as defined in CPC 23) for the entity to apply retrospectively the effective interest method of IFRS 9 (CPC 48), the fair value of the financial asset or financial liability at the date of transition to IFRSs must be the new gross carrying amount of that financial asset or the new amortized cost of that financial liability at the date of transition to IFRSs.

Impairment of financial assets
B8D. The entity must apply the requirements regarding impairment in Section 5.5 of IFRS 9 (CPC 48), retrospectively, subject to the provisions in items B8E to B8G.

B8E. At the date of transition to IFRSs, the entity must use reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date those financial instruments were initially recognized (or for loan commitments and financial guarantee contracts at the date the entity became party to the irrevocable commitment in accordance with item 5.5.6 of IFRS 9 (CPC 48)) and must compare it with the credit risk at the date of transition to IFRSs (see also items B7.2.2 and B7.2.3 of IFRS 9 (CPC 48)).

B8F. In determining whether there has been a significant increase in credit risk since initial recognition, the entity may apply:
(a) the requirements described in items 5.5.10, B5.5.22 to B5.5.24 of IFRS 9 (CPC 48); and (b) the rebuttable presumption described in item 5.5.11 of IFRS 9 (CPC 48) for contractual payments that are more than 30 days past due if the entity applies the requirements regarding impairment, identifying significant increases in credit risk since initial recognition for those financial instruments based on information about payment delays.

B8G. If, at the date of transition to IFRSs, determining whether there has been a significant increase in credit risk since the initial recognition of the financial instrument requires undue cost or effort, the entity must recognize a loss provision in an amount equal to lifetime expected credit losses at the date of each report until the financial instrument is derecognized (unless that financial instrument has low credit risk at the reporting date, in which case item B8F(a) is applicable).

Embedded derivatives
B9. At initial adoption, the entity must assess whether it is necessary for the embedded derivative to be separated from the main contract and accounted for as a derivative, based on the conditions that existed on the date that occurs later, between the date it became party to the contract for the first time and the date that reassessment is required by item B4.3.11 of IFRS 9 (CPC 48).

Government loans
B10. At initial adoption, the entity must classify all government loans received as a financial liability or equity instrument in accordance with Technical Pronouncement CPC 39 – Financial Instruments: Presentation. Except as permitted by item B11, the initial adopter must apply the requirements of IAS 20 (Technical Pronouncement CPC 07 – Government Grants and Disclosure of Government Assistance) prospectively to government loans existing at the date of transition to IFRSs and must not recognize the corresponding benefit of the government loan at an interest rate below market as a government grant. Consequently, if the initial adopter did not recognize and measure according to previous accounting practices the government loan with an interest rate below market, as required by IFRSs, it must use the carrying amount of the loan previously recorded at the date of transition to IFRSs as the carrying amount of the loan in the opening IFRS financial statements.

B11. Despite the provision in item B10, the entity may apply the requirements of IAS 20 (CPC 07) retrospectively to any government loan originated before the date of transition to IFRSs, provided that the information necessary to do so was obtained at the time of initial recognition of the loan.

B12. The requirements and guidance of items B10 and B11 do not prevent the entity from using the exceptions described in items D19 to D19C relating to financial instruments previously recognized at fair value through profit or loss.

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

Appendix C – Exemptions for business combinations
This appendix is an integral part of this Pronouncement. The entity must apply the following requirements in business combinations recognized before the date of transition to IFRSs. This Appendix must only be applied to business combinations within the scope of Technical Pronouncement CPC 15 – Business Combinations.

C1. A first-time adopter may decide not to apply IFRS 3 (Technical Pronouncement CPC 15 – Business Combinations) retrospectively to past business combinations (business combinations that occurred before the date of transition to IFRSs). However, if the first-time adopter restates and re-presents any business combination to align with IFRS 3, it must re-present all other business combinations in the same situation and must also apply IFRS 10 (Technical Pronouncement CPC 36 – Consolidated Financial Statements) from the same date. For example, if the first-time adopter decides to re-present a business combination that occurred on June 30, 20X6, it must re-present all business combinations occurring between June 30, 20X6 and the date of transition to IFRSs, and must also apply IFRS 10 (Technical Pronouncement CPC 36 – Consolidated Financial Statements) from June 30, 20X6.

C2. The entity does not need to apply IAS 21 – The Effects of Changes in Foreign Exchange Rates (Technical Pronouncement CPC 02 – Effects of Changes in Foreign Exchange Rates and Translation of Financial Statements) retrospectively to fair value adjustments and goodwill arising from business combinations that occurred before the date of transition to IFRSs. If the entity does not apply IAS 21 retrospectively to fair value adjustments and goodwill, it must treat them as assets and liabilities of the entity rather than treating them as assets and liabilities of the acquiree. Therefore, fair value adjustments and goodwill are either already expressed in the entity's functional currency items or in non-monetary items converted to foreign currency, which must be disclosed using the exchange rate applied by previous accounting criteria.

C3. The entity may apply IAS 21 (Technical Pronouncement CPC 02) retrospectively to fair value adjustments and goodwill arising from:
(a) all business combinations that occurred before the date of transition to IFRSs; or (b) all business combinations that the entity chooses to restate to comply with IFRS 3 (Technical Pronouncement CPC 15), as permitted in item C1 above.

C4. When the first-time adopter does not apply IFRS 3 (CPC 15) retrospectively to past business combinations, this procedure has the following effects for such business combinations:
(a) The first-time adopter must maintain the same classification (such as an acquisition by the legal acquirer or a reverse acquisition by a legal acquiree or a merger) used in its financial statements under previous accounting criteria.
(b) The first-time adopter must recognize all assets and liabilities at the date of transition to IFRSs that were acquired or assumed in past business combinations, except:

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.gov.br/cvm CVM RESOLUTION NO. 75, OF MARCH 22, 2022

(i) any unrecognized financial asset or liability according to previous accounting criteria (see item B2); and (ii) assets, including goodwill and liabilities that were not recognized in the acquirer's consolidated balance sheet according to previous accounting criteria and would not qualify for recognition according to IFRSs in the separate or individual balance sheet of the acquiree (see the provisions in items (f) to (i) below). A first-time adopter must recognize any resulting change, adjusting accumulated profits or losses (or, if appropriate, in another equity account), unless the change results from the recognition of an intangible asset previously included in goodwill (see the provisions in item (g)(i) below).

(c) A first-time adopter must exclude from its opening IFRS balance sheet any item recognized by previous accounting criteria that did not qualify for recognition as an asset or liability under IFRSs. In this case, the first-time adopter must account for the resulting changes as follows:
(i) the first-time adopter may have classified a past business combination as an acquisition and recognized as an intangible asset an item that does not qualify as an asset for recognition according to IAS 38 – Intangible Assets (Technical Pronouncement CPC 04 – Intangible Asset). The entity must reclassify this item (and, if applicable, the corresponding deferred tax, as well as non-controlling interests) as part of goodwill (see (g)(i) below); (ii) the first-time adopter must recognize all other resulting changes in accumulated profits or losses (such changes include reclassifications from, or to, intangible assets when goodwill was not recognized as an asset according to previous accounting criteria. This happens if, according to previous accounting criteria, the entity did not treat the business combination as an acquisition).

(d) IFRSs require subsequent measurement of some assets and liabilities on bases different from historical cost, such as fair value. A first-time adopter must measure such assets and liabilities on these bases in its opening IFRS balance sheet, even if they were acquired or assumed in past business combinations. The entity must recognize any change in their respective book balances directly in accumulated profits or losses (or, if appropriate, in another equity account) and not in goodwill.

(e) Immediately after the business combination, the book values according to previous accounting criteria of the acquired assets and assumed liabilities in the respective combination will correspond to the cost assigned according to IFRSs on that date. If IFRSs require a cost-based measurement for these assets and liabilities at a later date, such assigned cost must constitute the cost basis for depreciation and amortization purposes from the date of the business combination.

(f) If the acquired asset or assumed liability in a past combination was not recognized by previous accounting criteria, they will not have an assigned cost equal to zero in the opening IFRS balance sheet. Instead, the acquirer must recognize and measure such items in its consolidated balance sheet on the same bases that IFRSs would require for the acquiree's balance sheet. To illustrate: if the acquirer did not capitalize, in accordance with previous accounting criteria, the leases acquired in a past business combination in which the acquiree was the lessee, the acquirer must capitalize these leases in its consolidated financial statements, as IFRS 16 – Leases (CPC 06 – Leases) would require the acquiree to do in its IFRS balance sheet. Similarly, if the acquirer did not recognize the contingent liability according to previous accounting criteria, which still exists on the transition date to IFRSs, the acquirer must recognize such contingent liability unless IAS 37 – Provisions, Contingent Liabilities and Contingent Assets (CPC 25 – Provisions, Contingent Liabilities and Contingent Assets) does not allow such recognition in the acquiree's financial statements. Conversely, if the asset or liability was included in the value of goodwill according to previous accounting criteria, but should have been recognized separately according to IFRS 3 (CPC 15), such asset or liability must remain included in goodwill, unless IFRSs require that it be recognized in the acquiree's financial statements.

(g) The book value of goodwill in the opening IFRS balance sheet must be the corresponding book value determined by previous accounting criteria on the transition date to IFRSs, after the two adjustments below:
(i) when required by item (c)(i) above, the first-time adopter must increase the book balance of goodwill when reclassifying an item that was recognized as an intangible asset according to previous accounting criteria. Similarly, if item (f) above requires the first-time adopter to recognize an intangible asset that was included in the value of goodwill according to previous accounting criteria, such entity must therefore decrease the book value of goodwill (and, if applicable, adjust the corresponding deferred tax, as well as non-controlling interests); (ii) regardless of whether there is any indication that goodwill is affected regarding its recoverable amount, the first-time adopter must apply the provisions of IAS 36 – Impairment of Assets (Technical Pronouncement CPC 01 – Reduction to Recoverable Value of Assets) and test goodwill against its recoverable amount on the transition date to IFRSs and must recognize any resulting loss directly in accumulated profits or losses (or, if required by IAS 36 (Technical Pronouncement CPC 01), in revaluation reserve). The impairment test must be based on the conditions of the transition date to IFRSs.

(h) No other adjustment must be made to the book value of goodwill on the transition date to IFRSs. For example, the first-time adopter must not restore the book value of goodwill to:
(i) exclude research and development in progress acquired in that business combination (unless the related intangible asset qualifies for recognition by IAS 38 (Technical Pronouncement CPC 04 – Intangible Asset) in the acquiree's balance sheet); (ii) adjust previous amortizations of goodwill; (iii) reverse adjustments made to goodwill that would not be allowed by IFRS 3 (Technical Pronouncement CPC 15), but that were

realized by previous accounting criteria due to adjustments in assets and liabilities between the date of the business combination and the transition date to IFRSs.

(i) (eliminated);
(i) (eliminated);
(ii) (eliminated).

(j) In accordance with previous accounting criteria, the first-time adopter may not have consolidated a subsidiary acquired in a past business combination (for example, because the parent did not consider it a subsidiary according to previous accounting criteria or did not prepare consolidated financial statements). The first-time adopter must adjust the book values of the subsidiary's assets and liabilities to the values that would be required by IFRSs for the subsidiary's balance sheet. The assigned cost of goodwill will, on the transition date to IFRSs, be equal to the difference between:
(i) the parent's share of such adjusted book values; and (ii) the cost of the investment in the subsidiary in the parent's separate financial statements.

(k) The measurement of non-controlling interests and deferred tax must follow the measurement of other assets and liabilities. Therefore, the above adjustments recognized in assets and liabilities affect non-controlling interests and deferred tax.

C5. The exceptions for past business combinations must also be applied to past acquisitions of investments in associates, interests in jointly controlled entities, and interests in joint operations where the activity of the joint operation is a business, as defined in Technical Pronouncement CPC 15. Furthermore, the date selected according to item C1 must equally be applied to such acquisitions.

Appendix D – Exemptions from other IFRSs
This appendix is an integral part of this Pronouncement.

D1. The entity may opt for one or more of the following exemptions:
(a) (eliminated);
(b) (eliminated);
(c) assigned cost (items D5 to D8B);
(d) lease (items D9 and D9B to D9E);
(e) (eliminated);
(f) cumulative translation differences (items D12 to D13B); (g) investments in subsidiaries, jointly controlled entities and associates (items D14 and D15); (h) assets and liabilities of subsidiaries, jointly controlled entities and associates (items D16 and D17); (i) compound financial instruments (item D18); (j) designation of previously recognized financial instruments (items D19 to D19C); (k) (eliminated); (l) liabilities arising from decommissioning included in the cost of property, plant and equipment (items D21 and D21A); (m) financial assets or intangible assets accounted for according to IFRIC 12 – Service Concession Arrangements (ICPC 01 – Concession Contracts) (item D22); (n) (eliminated); (o) (eliminated); (p) extinguishment of financial liabilities with equity instruments (item D25); (q) severe hyperinflation (items D26 to D30); (r) joint operations (item D31); (s) removal costs of overburden in the surface mine production phase (item D32); (t) designation of contracts to buy or sell non-financial items (item D33); (u) revenue (items D34 and D35); and (v) foreign currency transaction and advance (item D36). The entity must not apply these exemptions by analogy to other items.

Share-based payment transactions
D2. A first-time adopter must observe the rules established by its regulatory body when Technical Pronouncement CPC 10 – Share-based Payment enters into force, when these do not conflict with IFRSs.
D3. (Eliminated).

Insurance contracts
D4. A first-time adopter may apply the transitional provisions of IFRS 4 – Insurance Contracts (Technical Pronouncement CPC 11 – Insurance Contracts). IFRS 4 (Technical Pronouncement CPC 11) restricts changes in accounting policies for insurance contracts, including those made by a first-time adopter.

Assigned cost
D5. The entity may opt for the measurement of a property, plant and equipment asset, on the transition date to IFRSs, by the assigned cost of that date, according to Interpretation ICPC 10 – Interpretation on the Initial Application to Property, Plant and Equipment and Investment Property of Technical Pronouncements CPCs 27, 28, 37 and 43. D6. A first-time adopter that has, according to the accounting practice previously adopted in Brazil, recognized a revaluation of assets held on the transition date to IFRSs, must maintain it as assigned cost for the purposes of its IFRS financial statements if this revaluation was, on the date of the revaluation, comparable with:
(a) fair value; or
(b) cost (or depreciated cost) according to IFRSs, adjusted to reflect, for example, changes in price indices (general or specific).
D7. The option provided in item D5 is also available for:
(a) investment properties, if the entity opts for the cost model provided in IAS 40 – Investment Property (Technical Pronouncement CPC 28 – Investment Property); (aa) right-of-use asset (CPC 06); and (b) (eliminated):
(i) (eliminated);
(ii) (eliminated).
The entity must not use these options for other assets or liabilities.
D8. (Eliminated).
D8A. The costs of assets for oil and gas in the development or production phases may have been accounted for in cost centers that include all properties in a wide geographical area. A first-time adopter that uses these accounting practices may opt to measure assets for oil and gas on the transition date to IFRSs on the following basis:
(a) assets in the exploration and evaluation phases according to their previous accounting practices; and (b) assets in the development and production phases by the amount determined for cost centers according to previous practices. The entity must allocate this cost to the underlying assets of the cost center, using as an allocation criterion the volume or value of reserves on that date. The entity must test assets in the exploration and evaluation phases and assets in the development and production phases for impairment on the transition date to IFRSs and, if necessary, must reduce the value of the assets determined as per (a) or (b) above. For the purposes of this item, assets for oil and gas comprise only those assets used in the exploration, evaluation, development, or production of oil and gas. D8B. Some entities hold items of property, plant and equipment, right-of-use assets, or intangibles that are used, or were previously used, in operations subject to regulated tariffs. The book value of these items may include values that were determined according to previous accounting practices, but do not qualify for capitalization according to IFRS. If this is the case, the first-time adopter may choose to use the book value according to previous accounting practices of this item on the transition date to IFRSs as assigned cost. If the entity applies this exemption to an item, it does not need to apply it to all items. On the transition date to IFRSs, the entity must test each item for which this exemption is used for impairment according to IAS 36 (CPC 01 – Reduction to Recoverable Value of Assets). For the purposes of this item, operations are subject to regulated tariffs if they provide goods or services to customers at prices established by an authorized body, qualified to establish tariffs that bind customers and are intended to recover the specific costs incurred by the entity in providing the regulated goods or services and to obtain a specific return. The specific return may be a minimum value or a range and does not need to be a fixed or guaranteed return.

Lease
D9. The first-time adopter may assess whether an existing contract on the transition date to IFRSs contains a lease, applying items 9 to 11 of CPC 06 to these contracts based on facts and circumstances existing on that date.
D9A. (Eliminated).
D9B. When the first-time adopter, which is a lessee, recognizes lease liabilities and right-of-use assets, it may apply the following approach to all its lease contracts (subject to the practical expedients described in item D9D):
(a) measure the lease liability on the transition date to IFRSs. The lessee following this approach must measure this lease liability at the present value of the remaining lease balance (see item D9E), discounted using the lessee's incremental borrowing rate (see item D9E) on the transition date to IFRSs; (b) measure the right-of-use asset on the transition date to IFRSs. The lessee must choose, lease by lease, to measure the right-of-use asset by:
(i) its book value as if CPC 06 had been applied from the lease commencement date (see item D9E), but discounted, using the lessee's incremental borrowing rate on the transition date to IFRSs; or (ii) a value equal to the lease liability, adjusted by the value of any prepaid lease payments or accrued lease payments, related to these leases, recognized in the balance sheet immediately before the transition date to IFRSs; (c) apply CPC 01 to right-of-use assets on the transition date to IFRSs. D9C. Notwithstanding the requirements of item D9B, the first-time adopter, which is a lessee, must measure the right-of-use asset at fair value on the transition date to IFRSs for leases that meet the definition of investment property in CPC 28 and are measured using the fair value model in CPC 28 from the transition date to IFRSs.

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

D9D. A first-time adopter, which is a lessee, may use one or more of the following items on the date of transition to IFRSs, applied on a lease-by-lease basis:
(a) apply a single discount rate to a portfolio of leases with reasonably similar characteristics (for example, similar remaining lease term for a similar class of underlying assets in a similar economic environment); (b) elect not to apply the requirements of item D9B to leases for which the lease term (see item D9E) ends within 12 months of the date of transition to IFRSs. Instead, the entity shall account for (including disclosure of information about) these leases as if they were short-term leases accounted for in accordance with item 6 of CPC 06; (c) elect not to apply the requirements of item D9B to leases for which the underlying asset is of low value (as described in items B3 to B8 of CPC 06). Instead, the entity shall account for (including disclosure of information about) these leases in accordance with item 6 of CPC 06; (d) exclude direct initial costs (see item D9E) from the measurement of the right-of-use asset at the date of transition to IFRSs; (e) use hindsight, such as in determining the lease term, if the contract contains options to extend or terminate the lease contract.

D9E. Lease payment, lessee, lessee’s incremental borrowing rate, lease commencement date, direct initial costs and lease term are terms defined in CPC 06 and shall be used in this pronouncement with the same meaning.

D10-D11. (Eliminated).

Cumulative translation differences

D12. IAS 21 (Technical Pronouncement CPC 02 – The Effects of Changes in Foreign Exchange Rates and Translation of Financial Statements) requires an entity to:
(a) recognize some translation differences in other comprehensive income and accumulate them directly in a special account of equity; and (b) upon disposal of an operation in a foreign country, reclassify the cumulative translation difference of that foreign operation (including, if applicable, gains and losses on related hedges) from equity to profit or loss as part of the gain or loss on disposal.

D13. However, a first-time adopter does not need to comply with these requirements regarding cumulative translation differences that existed until the date of transition to IFRSs, determining that, if the first-time adopter uses this exemption:
(a) the cumulative differences for all foreign operations shall be assumed to be zero at the date of transition to IFRSs; and (b) the gain or loss on subsequent disposal of any foreign operation shall exclude those translation differences that occurred before the date of transition to IFRSs and only translation differences subsequent to that date shall be included.

D13A. Instead of applying item D12 or item D13, a subsidiary that uses the exemption of item D16(a) may choose, in its financial statements, to measure the cumulative translation differences for all foreign operations at the carrying amount that would be included in the parent’s consolidated statement, based on the parent’s transition date to CPCs, provided no adjustment is made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary. A similar option is available for a jointly controlled entity or associate that opts for the exemption of item D16(a).

D13B. As a consequence of items D12 and D13, and considering that entities have, by virtue of the validity given to Technical Pronouncement CPC 02 by their regulatory bodies, begun to recognize these gains or losses from translation differences likely at a date prior to the date of transition to IFRSs, first-time adopters must zero the balances of these existing cumulative translation differences in their financial statements prepared in accordance with CPC 02, at the transition date, transferring them to accumulated profits or losses, as well as disclose the earnings distribution policy applicable to such balances.

Investments in subsidiaries, jointly controlled entities and associates

D14. When the entity prepares separate financial statements, IAS 27 (CPC 35) requires it to account for its investments in subsidiaries, jointly controlled entities and associates:
(a) at cost;
(b) in accordance with IFRS 9 (CPC 48); or
(c) using the equity method, as described in CPC 18.

D15. If a first-time adopter measures such an investment at cost in accordance with IAS 27 (CPC 35), it shall measure that investment at one of the following amounts in its separate financial statements (not to be confused with individual financial statements) upon first-time adoption of IFRSs:
(a) at the cost determined in accordance with IAS 27 (Technical Pronouncement CPC 35); or (b) at deemed cost. The deemed cost of this investment shall be:
(i) the fair value at the date of transition to IFRSs in its separate financial statements; or (ii) the value previously written down by the accounting policies previously used.
The first-time adopter may choose (i) or (ii) above to measure its investment in each subsidiary, jointly controlled entity or associate that it elects to be measured at deemed cost.

D15A. If the first-time adopter entity accounts for this investment using the equity method, as described in IAS 28 (CPC 18):
(a) the first-time adopter shall apply the exemption for past business combinations (Appendix C) in the acquisition of the investment; (b) if the entity becomes a first-time adopter for its separate financial statements earlier than for its consolidated financial statements and (i) after its parent, the entity shall apply item D16 in its separate financial statements; (ii) after its subsidiary, the entity shall apply item D17 in its separate financial statements.

Assets and liabilities of subsidiaries, jointly controlled entities and associates

D16. If a subsidiary becomes a first-time adopter after its parent, the subsidiary shall, in its financial statements, measure its assets and liabilities:
(a) at the carrying amounts that would be included in the parent’s consolidated financial statements, based on the parent’s transition date to IFRSs, if no adjustment has been made to reflect consolidation procedures and the effects of the business combination in which the parent acquired the subsidiary (this option is not available for a subsidiary of an investment entity, as defined in Technical Pronouncement CPC 36, which shall be measured at fair value through profit or loss); or (b) at the carrying amounts required in the remainder of this Pronouncement, based on the subsidiary’s transition date to IFRSs. These carrying amounts may be different from those described in (a) when:
(i) the exceptions provided in this Pronouncement result in measurements that depend on the date of transition to IFRSs; (ii) the accounting policies used in the subsidiary’s financial statements are different from those used in the consolidated financial statements. For example, the subsidiary may use the cost method as its accounting policy, as provided in IAS 16 – Property, Plant and Equipment (Technical Pronouncement CPC 27 – Property, Plant and Equipment) while the group may use the fair value method. A similar option is available for an associate or jointly controlled entity that becomes a first-time adopter of IFRSs at a date later than the entity that holds significant influence or joint control over it.

D17. However, if the entity becomes a first-time adopter after its parent (or associate or jointly controlled entity), the entity shall, in its consolidated financial statements, measure the assets and liabilities of the subsidiary (or associate or jointly controlled entity) at the same carrying amounts as in the financial statements of the subsidiary (or associate or jointly controlled entity), after making adjustments to reflect consolidation and equity accounting, as well as the effects of the business combination in which the entity acquired the subsidiary. Notwithstanding this requirement, a parent that is a non-investment entity shall not apply the consolidation exemption that is used by any subsidiaries that are investment entities.

Compound financial instruments

D18. IAS 32 – Financial Instruments: Presentation (Technical Pronouncement CPC 39 – Financial Instruments: Presentation) requires the entity to split a compound financial instrument into its liability and equity components from its initial recognition. If the liability component is settled, the retrospective application of IAS 32 (Technical Pronouncement CPC 39) involves separating it into two parts within equity. The first part, in accumulated profits or losses, representing the accumulated interest attributed to the liability component. The other part representing the original equity component. However, according to this Pronouncement, a first-time adopter does not need to separate these two parts when the liability component is settled at the date of transition to IFRSs.

Designation of previously recognized financial instruments

D19. IFRS 9 (CPC 48) allows a financial liability (provided it meets certain criteria) to be designated as a financial liability at fair value through profit or loss. Despite this requirement, the entity may designate, at the date of transition to IFRSs, any financial liability at fair value through profit or loss, provided that the liability meets the criteria of item 4.2.2 of IFRS 9 (CPC 48) on that date.

D19A. The entity may designate the financial asset as measured at fair value through profit or loss in accordance with item 4.1.5 of IFRS 9 (CPC 48) based on the facts and circumstances that exist at the date of transition to IFRSs.

D19B. The entity may designate the investment in an equity instrument as at fair value through other comprehensive income in accordance with item 5.7.5 of IFRS 9 (CPC 48) based on the facts and circumstances that exist at the date of transition to IFRSs.

D19C. For the financial liability that is designated as a financial liability at fair value through profit or loss, the entity shall determine whether the treatment in item 5.7.7 of IFRS 9 (CPC 48) creates an accounting mismatch in profit or loss based on the facts and circumstances existing at the date of transition to IFRSs.

Fair value measurement of financial assets or financial liabilities at initial recognition

D20. Notwithstanding the requirements of items 7 and 9, the entity may apply the requirements of item B5.1.2A(b) of IFRS 9 (CPC 48) to transactions entered into from the date of transition to IFRSs.

Liabilities arising from decommissioning included in the cost of property, plant and equipment

D21. IFRIC 1 – Changes in Existing Decommissioning, Restoration and Similar Liabilities (Technical Interpretation ICPC 12 – Changes in Decommissioning, Restoration and Other Similar Liabilities) requires that specific changes in a decommissioning, restoration or other similar liability be added to or deducted from the cost of the asset to which it relates; the adjusted depreciable amount of the asset shall then be depreciated prospectively over its useful life. A first-time adopter does not need to comply with these requirements in the case of changes occurring in these liabilities before the date of transition to IFRSs. If a first-time adopter makes use of this exception, it shall:
(a) measure the liabilities at the date of transition to IFRSs in accordance with IAS 37 (Technical Pronouncement CPC 25); (b) to the extent that such liabilities are within the scope of IFRIC 1 (ICPC 12), the entity shall estimate the amount that would have been included in the cost of the assets to which they relate, when the liability originated, by calculating the present value of the liability on that date using the best estimate of the historical discount rate adjusted for risk that could have been applied to that liability over that period; and (c) calculate the accumulated depreciation on that amount, at the date of transition to IFRSs, considering as a basis the current estimate of the asset’s useful life, using the depreciation policy adopted by the entity in accordance with IFRSs.

D21A. If the entity uses the exception of item D8A(b) (for oil and gas assets in the development or production phase accounted for in cost centers that include all properties in a large geographic area in accordance with previous practices), it shall, instead of applying item D21 or IFRIC 1 (ICPC 12 – Changes in Decommissioning, Restoration and Other Similar Liabilities):
(a) measure decommissioning, restoration and other similar liabilities at the date of transition to IFRSs in accordance with IAS 37 (CPC 25 – Provisions, Contingent Liabilities and Contingent Assets); and (b) recognize directly in accumulated profits or losses any difference between this amount and the carrying amount of these liabilities at the date of transition to IFRSs determined in accordance with previous practices.

Financial assets and intangible assets accounted for in accordance with IFRIC 12

D22. A first-time adopter may apply the transitional provisions of IFRIC 12 – Concessions (ICPC 01 – Concession Contracts).

D23-24. (Eliminated).

Settlement of financial liabilities with equity instruments

D25. IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments (Technical Interpretation ICPC 16 – Extinguishing Financial Liabilities with Equity Instruments) has an effective date prescribed by the IASB for annual periods beginning on or after July 1, 2010. However, a first-time adopter may apply it early, disclosing such fact in its financial statements.

Severe hyperinflation

D26. If the entity has a functional currency that was, or is, the currency of a hyperinflationary economy, it shall determine whether it is subject to severe hyperinflation before the date of transition to IFRSs. This is applicable to entities that are adopting IFRSs for the first time, as well as to entities that applied IFRSs previously.

D27. The currency of a hyperinflationary economy is subject to severe hyperinflation if it has the following characteristics:
(a) a reliable general price index is not available to all entities with transactions and balances in the currency; (b) there is no convertibility between the currency and a foreign currency considered stable.

D28. The entity’s functional currency will cease to be subject to severe hyperinflation on the date of normalization of the functional currency. This will be the date when the functional currency no longer has one, or both, of the characteristics of item D27, or when there is a change in the entity’s functional currency to a currency that is not subject to severe hyperinflation.

D29. When the entity’s date of transition to IFRSs is the date of normalization of the functional currency, or later, the entity may choose to measure all assets and liabilities held before the date of normalization of the functional currency at fair value at the date of transition to IFRSs. The entity may use these fair values as deemed cost of these assets and liabilities in the opening IFRS financial statements.

D30. When the date of normalization of the functional currency falls within the 12-month comparative period, the comparative period may be less than 12 months, provided that a complete set of financial statements (as required by item 10 of IAS 1, Technical Pronouncement CPC 26 – Presentation of Financial Statements) is provided for that shorter period.

Joint operations

D31. A first-time adopter may apply the transitional provisions of IFRS 11 (Technical Pronouncement CPC 19 – Joint Arrangements) with the following exceptions:
(a) when applying the transitional provisions of IFRS 11 (Technical Pronouncement CPC 19), the first-time adopter shall apply these provisions at the date of transition to IFRSs.
(b) when changing from proportional consolidation to the equity method, the first-time adopter shall subject the investment to an asset impairment test in accordance with IAS 36 (Technical Pronouncement CPC 01) at the date of transition to IFRSs, regardless of whether there is any indication that the investment may present impairment issues. The resulting write-down to recoverable amount shall be recognized as an adjustment to accumulated profits (losses) at the date of transition to IFRSs.

Stripping costs in the production phase of a surface mine

D32. When effecting the initial adoption of IFRSs, the entity may apply the transitional provisions provided in items A1 to A4 of IFRIC 20 (Technical Interpretation ICPC 18 – Stripping Costs in the Production Phase of a Surface Mine).

Designation of contracts to buy or sell a non-financial item

D33. IFRS 9 (CPC 48) allows some contracts to buy or sell a non-financial item to be designated, initially, as measured at fair value through profit or loss (see item 2.5 of IFRS 9 (CPC 48)). Despite this requirement, the entity may designate, at the date of transition to IFRSs, existing contracts on that date as measured at fair value through profit or loss, but only if they meet the requirements of item 2.5 of IFRS 9 (CPC 48) on that date and the entity designates all similar contracts.

Revenue

D34. The first-time adopter may apply the transitional provisions of item C5 of IFRS 15 (CPC 47). In these items, references to the “date of initial application” shall be interpreted as the beginning of the first reporting period in accordance with IFRSs. If the first-time adopter decides to apply these transitional provisions, it shall also apply item C6 of IFRS 15 (CPC 47).

D35. The first-time adopter is not required to restate contracts that were completed before the earliest period presented. A completed contract is the contract by which the entity transferred all identified goods or services in accordance with previous accounting policies.

Foreign currency transaction and advance

D36. The first-time adopter does not need to apply IFRIC 22 (ICPC 21 – Foreign Currency Transactions and Advance Payments) to assets, expenses and revenues within the scope of this interpretation initially recognized before the date of transition to the pronouncements, interpretations and guidance.

Appendix E – Short-term exemptions from IFRSs – (Eliminated)

SECURITY 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.gov.br/cvm

CVM RESOLUTION NO. 75, OF MARCH 22, 2022
Implementation Guide

This implementation guide accompanies, but does not form part of, Technical Pronouncement CPC 37.

Introduction

IG1. This implementation guide:
(a) explains how the requirements of Technical Pronouncement CPC 37 interact with the requirements of other technical pronouncements and IFRSs (items IG2 to IG65). These explanations address those requirements that are likely to involve issues specific to first-time adopters; (b) includes an illustrative example showing how a first-time adopter should disclose how the transition to IFRSs affected its opening balance sheet, financial performance (profit or loss), and cash flows, as required by items 24(a), 24(b), 25, and 26 of Technical Pronouncement CPC 37 (item IG 63).

IAS 10 – Events after the Reporting Period (Technical Pronouncement CPC 24 – Subsequent Event)

IG2. Except as described in item IG3, the entity shall apply IAS 10 (Technical Pronouncement CPC 24) to determine whether:
(a) the opening IFRS balance sheet reflects an event that occurred after the date of transition to IFRSs; and (b) the comparative amounts in its first IFRS financial statements reflect an event that occurred after the end of that comparative period.

IG3. Items 14 to 17 of Technical Pronouncement CPC 37 require some modifications to the principles in IAS 10 (Technical Pronouncement CPC 24) when a first-time adopter determines whether changes in its estimates are subsequent events that require or do not require accounting adjustments at the date of transition to IFRSs (or, when applicable, at the end of the comparative period). Cases 1 and 2 below illustrate these modifications. In Case 3 below, items 14 to 17 of Technical Pronouncement CPC 37 do not require modifications to the principles of IAS 10 (Technical Pronouncement CPC 24).

(a) Case 1 – Previous GAAP required estimates of similar items at the date of transition to IFRSs, and a consistent accounting policy with such practices was used. In this case, IFRS estimates must be consistent with the estimates made for that date by previous GAAP, unless there is objective evidence that the estimates were wrong (see IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors – Technical Pronouncement CPC 23 – Accounting Policies, Changes in Accounting Estimates and Correction of Errors). The entity shall disclose subsequent revisions of such estimates as events of the period in which the revisions were made and not as adjustments for subsequent events resulting from the receipt of additional evidence about conditions that existed at the date of transition to IFRSs.

(b) Case 2 – Previous GAAP required estimates for similar items at the date of transition to IFRSs, but the entity made such estimates using an accounting policy not consistent with IFRSs. In this case, IFRS estimates must be consistent with the estimates made for that date based on previous GAAP after appropriate adjustments for differences in accounting policy (unless there is objective evidence that these estimates were wrong). The opening IFRS balance sheet shall reflect those adjustments for differences in accounting policy. As in Case 1, the entity shall disclose subsequent revisions of these estimates as events of the period in which the revisions were made.

For example, previous GAAP may have required the entity to recognize and measure its provisions on bases consistent with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets (Technical Pronouncement CPC 25 – Provisions, Contingent Liabilities and Contingent Assets), except for measurements by previous GAAP, which were made on undiscounted bases. In this example, the entity shall use the estimates in conformity with previous GAAP as an input to the present value measurements, as required by IAS 37 (CPC 25).

(c) Case 3 – Previous GAAP did not require estimates of similar items at the date of transition to IFRSs. IFRS estimates for that date reflect conditions existing on that date. In particular, estimates of market prices, interest rates, and exchange rates at the date of transition to IFRSs reflect market conditions on that date. This is consistent with the distinction in IAS 10 (CPC 24) between adjustments for subsequent events that require adjustments to carrying amounts and those that do not require such adjustments.

IG Example 1 - Estimates

Context

The first IFRS financial statements of Entity “A” correspond to the period ended on December 31, 2010, and include comparative information for one year. In its financial statements under previous GAAP for December 31, 2008, and 2009, Entity “A”:
(a) made estimates of expenses and provisions on an accrual basis on those dates; (b) accounted for a defined benefit retirement plan on a cash basis; and (c) did not recognize a provision related to a lawsuit arising from events that occurred in September 2009. When the lawsuit was concluded, on June 30, 2010, the entity was required to pay $1,000, which occurred on July 10, 2010.

In preparing its first IFRS financial statements, Entity “A” concluded that its estimates of expenses and provisions on an accrual basis on December 31, 2008, and 2009, under previous GAAP, were made using accounting policies consistent with IFRSs. Although it discovered that some provisions were overestimated and others underestimated, Entity “A” concluded that such estimates were reasonable and that, therefore, no error occurred. As a result, accounting for these over- and under-estimates required routine adjustments for accounting estimates in accordance with IAS 8 (Technical Pronouncement CPC 23).

Application of Requirements

In preparing its opening IFRS balance sheet on January 1, 2009, and the comparative balance sheet on December 31, 2009, Entity “A”:
(a) did not adjust the previous estimates of expenses and provisions on an accrual basis; and (b) made the necessary estimates (on an accrual basis) to account for the retirement plan in accordance with IAS 19 – Employee Benefits (Technical Pronouncement CPC 33 – Employee Benefits). Entity “A”’s actuarial assumptions on January 1, 2009, and December 31, 2009, did not reflect conditions subsequent to those dates. For example:
(i) Entity “A”’s discount rates on January 1, 2009, and December 31, 2009, for the retirement plan and provisions reflected market conditions on those dates; and (ii) the actuarial assumptions on January 1, 2009, and December 31, 2009, regarding future employee turnover rates did not reflect conditions occurring after those dates – such as a significant increase in estimated employee turnover rates due to the shortening of the retirement plan in 2010.

The treatment of the lawsuit on December 31, 2009, depends on the reasons why Entity “A” did not recognize the provision under previous GAAP on that date.

Assumption 1 – Previous GAAP were consistent with the provisions of IAS 37 – Provisions, Contingent Liabilities and Contingent Assets (Technical Pronouncement CPC 25 – Provisions, Contingent Liabilities and Contingent Assets). Entity “A” concluded that the recognition criterion was not met. In this case, Entity “A”’s assumptions in conformity with IFRSs are consistent with the assumptions under previous GAAP. Therefore, Entity “A” does not recognize the provision on December 31, 2009.

Assumption 2 – Previous GAAP were not consistent with the provisions of IAS 37 (Technical Pronouncement CPC 25). Therefore, Entity “A” developed estimates in accordance with IAS 37 (CPC 25). Under IAS 37, Entity “A” must determine whether there is an obligation at the end of the reporting period, taking into account all available evidence, including some additional evidence resulting from subsequent events after the end of the reporting period. Similarly, in accordance with IAS 10 – Events after the Reporting Period (Technical Pronouncement CPC 24 – Subsequent Event), the resolution of the lawsuit after the reporting period is a subsequent event that requires an accounting adjustment if it confirms that the entity had a present obligation on that date. In this situation, the resolution of the lawsuit confirms that Entity “A” had an obligation in September 2009 (when the event occurred and gave rise to the lawsuit). Therefore, Entity “A” must recognize a provision on December 31, 2009. Entity “A” shall measure this provision by calculating the present value on December 31, 2009, of the amount paid on July 10, 2010 ($1,000), using the discount rate in accordance with CPC 25 that reflects market conditions on December 31, 2009.

IG4. The provisions of items 14 to 17 of Technical Pronouncement CPC 37 do not override the requirements of other IFRSs regarding classifications or measurements based on circumstances existing on specific dates. Examples of this include:
(a) the distinction between finance and operating leases (see IAS 17 – Leases – Technical Pronouncement CPC 06 – Leases); (b) the restrictions in IAS 38 – Intangible Assets (Technical Pronouncement CPC 04 – Intangible Assets), which prohibit the capitalization of expenditures relating to internally generated intangible assets if the asset does not qualify for recognition when those expenditures were incurred; and (c) the distinction between a financial liability and an equity instrument (see IAS 32 – Financial Instruments: Presentation, Technical Pronouncement CPC 39 – Financial Instruments: Presentation).

IAS 12 – Income Taxes (Technical Pronouncement CPC 32 – Income Taxes)

IG5. The entity shall apply IAS 12 (Technical Pronouncement CPC 32) to temporary differences between the carrying amounts of assets and liabilities in its opening IFRS balance sheet and their respective tax bases.

IG6. In accordance with IAS 12, the measurement of current and deferred tax shall reflect the tax rates and tax legislation enacted or substantively enacted at the end of the reporting period. The entity shall account for the effects of changes in tax rates and tax legislation when they are enacted or substantially enacted.

IAS 16 – Property, Plant and Equipment (Technical Pronouncement CPC 27 – Property, Plant and Equipment)

IG7. When the entity’s depreciation rates and methods under previous GAAP are acceptable under IFRSs, the entity shall account for any change in the estimated useful life or depreciation model prospectively when it makes such changes (items 14 and 15 of Technical Pronouncement CPC 37 and item 61 of IAS 16 – Technical Pronouncement CPC 27). However, in some cases, the entity’s depreciation rates and methods under previous GAAP may differ from those that would be acceptable under IFRSs (for example, when they were adopted solely for tax purposes and do not reasonably reflect the useful life of the corresponding assets). When the effect of these differences is material in the financial statements, the entity shall retrospectively adjust the accumulated depreciation in its opening IFRS balance sheet to comply with IFRSs.

IG8. The entity may elect to use one of the following values as deemed cost for property, plant and equipment, observing the content of Interpretation ICPC 10 – Interpretation on the Initial Application of Technical Pronouncements CPCs 27, 28, 37, and 43 to Property, Plant and Equipment and Investment Property:
(a) fair value at the date of transition to IFRSs (item D5 of this Technical Pronouncement), in which case the entity shall give the disclosures required by item 30 of this Technical Pronouncement; (b) revaluation under previous GAAP, which observes the criteria of item D6 of this Technical Pronouncement; (c) (eliminated); (d) allocation of an amount determined under previous GAAP that observes the criteria of item D8A of this Technical Pronouncement.

IG9. Subsequent depreciation shall be based on the respective deemed cost and shall commence on the date the entity establishes the deemed cost.

IG10-11. (Eliminated).

IG12. IAS 16 (Technical Pronouncement CPC 27 – Property, Plant and Equipment) requires that each part of an item of property, plant and equipment, whose cost is material in relation to the total cost of the item, be depreciated separately. However, IAS 16 (Technical Pronouncement CPC 27 – Property, Plant and Equipment) does not stipulate the measurement unit for asset recognition, i.e., what constitutes an item of property, plant and equipment. Therefore, judgment is required in applying the recognition criterion in the entity’s specific circumstances (see items 9 and 43 of IAS 16 – Technical Pronouncement CPC 27).

IG13. In some cases, the construction or placing in use of an asset results in an obligation for the entity to dismantle or remove the asset and restore the site it occupies. The entity shall apply IAS 37 – Provisions, Contingent Liabilities and Contingent Assets (Technical Pronouncement CPC 25 – Provisions, Contingent Liabilities and Contingent Assets) in the recognition and measurement of any provision resulting therefrom. The entity shall apply IAS 16 (Technical Pronouncement CPC 27) to determine the resulting amount to be included in the cost of the asset, before depreciation and impairment losses. Items such as depreciation and, when applicable, impairment losses, cause differences between the carrying amount of the liability and the amount included in the carrying amount of the asset. Changes in such liabilities shall be accounted for by the entity in accordance with IFRIC 1 – Changes in Existing Decommissioning, Restoration and Similar Liabilities (Interpretation ICPC 12 – Changes in Decommissioning, Restoration and Other Similar Liabilities). However, item D21 of IFRS 1 (Technical Pronouncement CPC 37) provides an exemption for changes that occurred before the date of transition to IFRSs and establishes alternative treatment when the exemption is used. An example of the first-time adoption of IFRIC 1 (ICPC 12), illustrating the use of this exemption, is contained in items IG201 to IG203.

IAS 17 – Leases (Technical Pronouncement CPC 06 – Leases)

IG14. At the date of transition to IFRSs, the lessee or the lessor shall classify leases as finance or operating based on the circumstances existing at the commencement of the lease (item 13 of IAS 17 – CPC 06). In some cases, the lessee and lessor may agree to change the terms of the lease contract, other than by renewal, in such a way that it would result in a different classification under IAS 17 (Technical Pronouncement CPC 06) if the modified terms of the lease contract had been in effect from its inception. In this case, the modified contract is considered as a new contract. However, changes in estimates (for example, changes in the estimate of the economic life or the residual value of the leased asset) or in circumstances (for example, due to lessee default) do not result in a new classification of the lease.

IG15. (Eliminated).

IG16. SIC 15 – Operating Leases – Incentives (Operating Lease – Incentive, contained in Interpretation ICPC 03 – Complementary Aspects of Leases) shall be applied to all lease contracts in effect at the transition date.

IAS 18 – Revenue (Technical Pronouncement CPC 30 – Revenue)

IG17. If the entity received amounts that have not yet qualified for recognition as revenue in accordance with IAS 18 (Technical Pronouncement CPC 30) (for example, the receipt of a sale that does not qualify for recognition as revenue), the entity shall recognize the amount received as a liability in its opening IFRS balance sheet and measure that liability by the amount received.

IAS 19 – Employee Benefits (Technical Pronouncement CPC 33 – Employee Benefits)

IG18. The transitional provisions in IAS 19 are not applicable to the entity’s opening IFRS balance sheet (item 9 of Technical Pronouncement CPC 37).

IG19. The entity’s actuarial assumptions at the date of transition to IFRSs shall be consistent with the actuarial assumptions established for the same date by previous GAAP (after adjustments to reflect any difference in accounting policy), unless there is objective evidence that such assumptions were wrong (item 14 of Technical Pronouncement CPC 37). The impact of subsequent revision on these assumptions is a gain or an actuarial loss of the period in which the entity makes such revisions.

IG20. The entity may need to establish actuarial assumptions at the date of transition to IFRSs that were not necessary in relation to its previous GAAP. Such actuarial assumptions shall not reflect conditions that arose after the date of transition to IFRSs. In particular, discount rates and the fair value of plan assets at the date of transition to IFRSs shall reflect market conditions on that date. Similarly, the entity’s actuarial assumptions at the date of transition to IFRSs regarding future employee turnover rates shall not reflect a significant increase in these rates resulting from the shortening of the retirement plan that occurred after the date of transition to IFRSs (item 16 of Technical Pronouncement CPC 37).

SECURITIES AND EXCHANGE COMMISSION COMMISSION
Sete de Setembro 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 – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil - Tel.: (61) 3327-2030/2031 www.gov.br/cvm CVM RESOLUTION NO. 75, OF MARCH 22, 2022

IG21. In many cases, the entity's first IFRS financial statements must reflect the measurements of employee benefit obligations at three dates: at the end of the first IFRS reporting period, at the comparative information date, and at the transition date to IFRSs. IAS 19 (Technical Pronouncement CPC 33) encourages the entity to engage a qualified actuary in the measurement of all its material post-employment benefit obligations. To minimize costs, the entity may request a qualified actuary to perform a detailed actuarial valuation at one or two of the indicated dates and adjust it(s) to another date (earlier or later). Any effect of roll-forward adjustments of the valuation to a future or past date must reflect material transactions or other relevant events between those dates (including changes in market prices and interest rates) (IAS 19, paragraph 57).

IAS 21 – The Effects of Changes in Foreign Exchange Rates (Technical Pronouncement CPC 02 – Effects of Changes in Exchange Rates and Conversion of Financial Statements)

IG21A. The entity, in accordance with previous accounting practices, may have treated the goodwill of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities resulting from that operation as assets and liabilities of the entity rather than assets and liabilities of the foreign operation. In this case, it is permitted for the entity to apply prospectively the requirements of paragraph 47 of IAS 21 for all acquisitions of foreign operations that occurred after the transition date to IFRSs.

IFRS 3 – Business Combinations (Technical Pronouncement CPC 15 – Business Combinations)

IG22. The following examples illustrate the effects of Appendix C of Technical Pronouncement CPC 37, assuming that a first-time adopter makes use of the exemptions provided.

IG Example 2 – Business Combination

Context
The entity “B”’s first IFRS financial statements correspond to the period ended on December 31, 2010, and include comparative information only for 2009. On July 1, 2006, entity “B” acquired 100% of the subsidiary “C”. In accordance with previous accounting practices, entity “B”:
(a) classified the business combination as an acquisition by entity “B”; (b) measured the acquired assets and assumed liabilities at the following values, under previous accounting practices on December 31, 2008 (the transition date to IFRSs):
(i) identifiable assets less liabilities for which IFRSs require measurement based on cost after the business combination: $ 200 (whose tax base is $ 150 and the tax rate is 30%); (ii) pension liabilities (being $ 130 the present value of defined benefit obligations, measured in accordance with Technical Pronouncement CPC 33, and $ 100 fair value of plan assets): $ zero (because entity “B” used the cash basis to account for pensions in accordance with previous accounting practices). The tax base of the pension liability is also zero;

Application of Requirements
In its opening IFRS consolidated balance sheet, entity “B”:
(a) must classify the business combination as an acquisition by entity “B” even that, under IFRSs, it would have to be classified as a reverse acquisition by subsidiary “C” (paragraph C4 (a) of Technical Pronouncement CPC 37); (b) must not adjust the accumulated amortization of goodwill. Entity “B” tested the goodwill for impairment against its recoverable amount, in accordance with IAS 36 (Technical Pronouncement CPC 01), recognizing the resulting loss based on conditions existing at the transition date to IFRSs. If there is no impairment loss against the recoverable amount, the carrying amount of goodwill must remain at $ 180 (paragraph C4(g) of Technical Pronouncement CPC 37) (c) for those identifiable assets acquired (net of assumed liabilities) for which IFRSs require a measurement based on cost after the combination, entity “B” must treat their respective carrying amounts in accordance with previous accounting practices immediately after the business combination as their respective costs assigned on that date (paragraph C4(e) of Technical Pronouncement CPC 37); (d) must not reinstate accumulated depreciation and amortization of the net assets identified in (c), unless the depreciation rates and methods under previous accounting practices result in values materially different from those calculated in accordance with IFRSs (for example, if they were adopted only for tax purposes and do not adequately reflect the estimated useful life of the assets in accordance with IFRSs). If no reinstatement is made, the carrying amount of the assets in question, in the opening IFRS balance sheet, must be equal to their respective carrying amounts under previous accounting practices at the transition date to IFRSs ($ 200) (paragraph IG7); (e) if there is any indication that the identified assets present impairment losses against their recoverable amount, the assets must be tested based on the conditions that existed at the transition date to IFRSs (see IAS 36 – Technical Pronouncement CPC 01); (f) must recognize the pension liability and measure it at the present value of the defined benefit obligation ($ 130) less the fair value of plan assets ($ 100), resulting in a carrying amount of $ 30, the counterpart of which is a debit of $ 30 in accumulated profits or losses (paragraph C4(d) of Technical Pronouncement CPC 37). However, if subsidiary “C” adopted IFRSs in a prior period, entity “B” must measure the pension liability at the same amount that was recognized in the financial statements of subsidiary “C” (paragraph D17 of Technical Pronouncement CPC 37 and IG Example 9); (g) must recognize the deferred tax liability of $ 6 (30% of $ 20) arising from:
(i) the taxable temporary difference of $ 50 ($ 200 less $ 150) from the acquired assets and assumed liabilities (except for pensions), less (ii) the deductible temporary difference of $ 30 ($ 30 less zero) from the pension liability.
The entity must recognize the increase in deferred tax liability as a reduction in accumulated profits or losses (paragraph C4(k) of Technical Pronouncement CPC 37). If the taxable temporary difference arises from the initial recognition of goodwill, entity “B” must not recognize the resulting deferred tax liability (paragraph 15(a) of IAS 12 – Income Taxes, Technical Pronouncement CPC 32 – Income Taxes).

IG Example 3 – Business Combination – Restructuring Provision

Context
Entity “D”’s first IFRS financial statements correspond to the period ended on December 31, 2010, and include comparative information only for 2009. On July 1, 2008, entity “D” acquired 100% of subsidiary “E”. Under previous accounting practices, entity “D” recognized a restructuring provision (undiscounted) of $ 100 that would not have qualified as an identifiable liability under CPC 15. The recognition of this restructuring provision increased goodwill by $ 100. On December 31, 2008 (the transition date to IFRSs), entity “D”:
(a) had already disbursed $ 60 of restructuring costs; and (b) estimated that it would have to disburse an additional $ 40 in 2009, at nominal value, and that the effect of bringing this amount to present value was immaterial. On December 31, 2008, these future costs did not qualify for recognition as a provision in accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets (Technical Pronouncement CPC 25 – Provisions, Contingent Liabilities and Contingent Assets).

Application of Requirements
In its opening IFRS balance sheet, entity “D”:
(a) must not recognize the restructuring provision (paragraph C4(c) of Technical Pronouncement CPC 37); (b) must not adjust the amount determined for goodwill. However, Entity “D” must test the goodwill for impairment in accordance with IAS 36 – Impairment of Assets (Technical Pronouncement CPC 01 – Reduction to Recoverable Amount of Assets), and must recognize any resulting loss (paragraph C4(g) of Technical Pronouncement CPC 37); (c) as a result of (a) and (b), accumulated profits or losses, in the opening IFRS balance sheet, had an increase of $ 40 (before income tax and recognition of impairment losses), compared to the balance under previous accounting practices.

IG Example 4 – Business Combination – Intangible Asset

Context
Entity “F”’s first IFRS financial statements correspond to the period ended on December 31, 2010, and include comparative information only for 2009. On July 1, 2006, entity “F” acquired 75% of subsidiary “G”. In accordance with previous accounting practices, entity “F” determined an initial carrying value of $ 200 for intangible assets that would not have qualified for recognition in accordance with IAS 38 – Intangible Assets (Technical Pronouncement CPC 04 – Intangible Assets). The tax base of the intangible assets was zero, giving rise to a deferred tax liability of $ 60 (30% of $ 200).

On December 31, 2008 (the transition date to IFRSs), the carrying amount of the intangible assets under previous accounting practices was $ 160 and the amount of the deferred tax liability was $ 48 (30% of 160).

Application of Requirements
Because the intangible assets do not qualify for recognition as separate assets in accordance with IAS 38, entity “F” must transfer the corresponding values to goodwill, together with the deferred tax liability ($ 48) and the non-controlling interest (paragraph C4(g)(i) of Technical Pronouncement CPC 37). The relevant non-controlling interest is $ 28 [($ 160 – $ 48) x 25%]. Therefore, the net increase in goodwill was $ 84, being the $ 160 of intangible assets, less $ 48 of deferred tax liability and less $ 28 of the relevant non-controlling interest.

Entity “F” must test goodwill for impairment in accordance with IAS 36 – Impairment of Assets (Technical Pronouncement CPC 01 – Reduction to Recoverable Amount of Assets) and must recognize the resulting loss based on conditions existing at the transition date to IFRSs (paragraph C4(g)(ii) of Technical Pronouncement CPC 37).

IG Example 5 (Eliminated)

IG Example 6 – Business Combination – Non-consolidated subsidiary under previous accounting practices

Context
The transition date to IFRSs for parent “J” is January 1, 2009. In accordance with previous accounting practices, parent “J” did not consolidate its 75% interest in subsidiary “K”, acquired in a business combination on July 15, 2006. On January 1, 2009:
(a) the cost of “J”’s investment in subsidiary “K” is $ 180; (b) under IFRSs, subsidiary K would have measured its assets at $ 500 and its liabilities (including deferred taxes in accordance with IAS 12 – Income Taxes, Technical Pronouncement CPC 32 – Income Taxes) at $ 300. On these bases, the net assets of subsidiary K would be $ 200 under IFRSs.

Application of Requirements
Parent “J” must consolidate subsidiary “K”. The consolidated balance sheet on January 1, 2009 must include:
(a) the assets of subsidiary “K” at $ 500 and liabilities at $ 300; (b) the non-controlling interest of $ 50 [($ 500 – $ 300) x 25%]; and (c) goodwill of $ 30 [$ 180 cost – ($ 500 – $ 300) x 75%] (paragraph C4(j) of Technical Pronouncement CPC 37). Parent “J” must test goodwill for impairment in accordance with IAS 36 – Impairment of Assets (Technical Pronouncement CPC 01 – Reduction to Recoverable Amount of Assets) and must recognize any resulting loss based on conditions existing at the transition date to IFRSs (paragraph C4(g)(ii) of Technical Pronouncement CPC 37).

IG Example 7 – Business Combination – Financial lease not capitalized under previous accounting practices

Context
The transition date to IFRSs for parent “L” is January 1, 2009. Parent “L” acquired subsidiary “M” on January 15, 2006 and did not capitalize the financial leases of subsidiary “M”. If subsidiary “M” prepared financial statements in accordance with IFRSs, it would have recognized financial lease obligations of $ 300 and lease assets of $ 250 on January 1, 2009.

Application of Requirements
In its consolidated IFRS balance sheet, parent “L” must recognize financial lease obligations of $ 300 and lease assets of $ 250, and the adjustment of $ 50 in accumulated profits or losses (paragraph C4(f)).

IG 23-25. (Eliminated).

IAS 27 – Consolidated and Separate Financial Statements (Technical Pronouncements CPC 35 – Separate Financial Statements and CPC 36 – Consolidated Financial Statements)

IG26. A first-time adopter must consolidate all its subsidiaries (as defined in IAS 27 – CPCs 35 and 36), unless IAS 27 provides otherwise.

IG27. If the first-time adopter does not consolidate a subsidiary in accordance with its previous accounting practices, then:
(a) in its consolidated financial statements, the first-time adopter must measure the assets and liabilities of the subsidiary at the same carrying amounts in the financial statements of that subsidiary, after adjustments for consolidation procedures and the effects of the business combination in which the subsidiary was acquired (paragraph D17 of Technical Pronouncement CPC 37). If the subsidiary has not adopted IFRSs in its financial statements, the carrying amounts described in the previous sentence are those that would be required by IFRSs in the consolidated financial statements (paragraph C4(j) of Technical Pronouncement CPC 37); (b) if the parent acquired the subsidiary in a business combination before the transition date to IFRSs, the parent must recognize goodwill as explained in IG Example 6; (c) if the parent did not acquire the subsidiary in a business combination because it established the subsidiary, the parent must not recognize goodwill.

IG28. When the first-time adopter adjusts the carrying amounts of the assets and liabilities of its subsidiaries in preparing its opening IFRS balance sheet, this may affect the non-controlling interest and deferred tax.

IG29. The following IG Examples 8 and 9 illustrate paragraphs D16 and D17 of Technical Pronouncement CPC 37, which deal with cases where the parent and subsidiary become first-time adopters on different dates.

IG Example 8 – Parent adopts IFRSs before the subsidiary

Context
Parent “N” presented its first IFRS financial statements in 2005. Its foreign subsidiary “O”, a wholly-owned subsidiary of parent “N” since its formation, prepares information in accordance with IFRSs for internal consolidation purposes from that date, however subsidiary “O” will not present its first IFRS financial statements until 2010.

Application of Requirements
If subsidiary “O” applies paragraph D16(a) of Technical Pronouncement CPC 37, the carrying amounts of its assets and liabilities must be the same in both balance sheets, the opening IFRS balance sheet on January 1, 2009 and the consolidated balance sheet of parent “N” (except for adjustments due to consolidation procedures) and must be based on the transition date to IFRSs of parent “N”.

Alternatively, subsidiary “O”, as provided in paragraph D16(b) of Technical Pronouncement CPC 37, may measure its assets or liabilities based on its own transition date to IFRSs (January 1, 2009). However, the fact that subsidiary “O” becomes a first-time adopter in 2010 must not change the carrying amounts of its assets and liabilities in the consolidated financial statements of parent “N”.

IG Example 9 – Subsidiary adopts IFRSs before the parent

Context
Parent “P” will present its first consolidated IFRS financial statements in 2010. Its foreign subsidiary “Q”, a wholly-owned subsidiary of parent “P” since its formation, presented its first IFRS financial statements in 2005. Until 2010, subsidiary “Q” prepares information for internal consolidation purposes in accordance with the previous accounting practices of parent “P”.

Application of Requirements
The carrying amounts of the assets and liabilities of subsidiary “Q” on January 1, 2009 must be the same both in the consolidated opening IFRS balance sheet of parent “P” and in the financial statements of subsidiary “Q” (except for adjustments due to consolidation procedures) and must be based on the transition date to IFRSs of subsidiary “Q”. The fact that parent “P” becomes a first-time adopter in 2010 must not change these carrying amounts (paragraph D17 of Technical Pronouncement CPC 37).

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

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

IG30. The provisions in items D16 and D17 of Technical Pronouncement CPC 37 do not override the following requirements:
(a) apply Appendix C of Technical Pronouncement CPC 37 to assets acquired and liabilities assumed in business combinations completed before the date of transition to IFRSs by the acquirer. However, the acquirer must apply item D17 to new assets acquired and liabilities assumed by the acquiree after that business combination and still existing at the date of transition to IFRSs by the acquirer; (b) apply the remainder of Technical Pronouncement CPC 37 in the measurement of all assets and liabilities for which items D16 and D17 are not relevant; (c) provide all disclosures required by Technical Pronouncement CPC 37 based on the same date of transition to IFRSs by the first-time adopter.

IG31. Item D16 of Technical Pronouncement CPC 37 must be applied when the subsidiary becomes a first-time adopter after its parent, for example, if the subsidiary previously prepared a package of reports in accordance with IFRSs for consolidation purposes, but did not present them as a complete set of IFRS financial statements. This may be relevant not only when the subsidiary's package of reports fully meets the recognition and measurement requirements of IFRSs, but also when it undergoes adjustments at the parent level due to matters such as a subsequent events review or allocations at the parent level of retirement costs. For the disclosures required by item 26 of Technical Pronouncement CPC 37, adjustments at the parent level in an unpublished package of reports are not considered as error corrections. However, item D16 does not allow the subsidiary to ignore errors in the financial statements that are immaterial in its parent's consolidated financial statements but are material in its own financial statements.

IAS 29 – Financial Reporting in Hyperinflationary Economies (Accounting and Disclosure in Highly Inflationary Economies)

IG32. The entity must comply with the provisions of IAS 21 – The Effects of Changes in Foreign Exchange Rates (Technical Pronouncement CPC 02 – Effects of Changes in Foreign Exchange Rates and Translation of Financial Statements) in determining its functional currency and presentation currency. When the entity prepares its opening IFRS balance sheet, it must apply IAS 29 for any period in which the economy of the functional currency or presentation currency is hyperinflationary.

IG33. The entity may opt to use fair value as the deemed cost for an item of property, plant and equipment at the date of transition to IFRSs (item D5 of Technical Pronouncement CPC 37), in which case it must disclose the explanatory notes required by item 30 of Technical Pronouncement CPC 37.

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

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

IG34. When the entity opts to use the exemptions provided in items D5 to D8 of Technical Pronouncement CPC 37, it must apply IAS 29 for the period after the date for which the revalued amount or fair value was determined.

IAS 32 – Financial Instruments: Presentation (Technical Pronouncement CPC 39 – Financial Instruments: Presentation)

IG35. In its opening IFRS balance sheet, the entity must apply the IAS 32 (Technical Pronouncement CPC 39) criterion to classify financial instruments (or components of compound instruments) issued as financial liabilities or equity instruments, according to the substance of the contractual agreement, when the instrument initially meets the recognition criterion in IAS 32 (CPC 39, items 15 and 30), without considering events after that date (except changes in instrument terms).

IG36. For compound instruments outstanding at the date of transition to IFRSs, the entity must determine the initial carrying amount of the components based on the circumstances existing when the instruments were issued (IAS 32 – CPC 39, item 30). The entity must determine these carrying amounts using the version of IAS 32 (Technical Pronouncement CPC 39) in effect at the end of its first IFRS reporting period. If the liability component is no longer outstanding at the date of transition to IFRSs, a first-time adopter does not need to separate the initial equity component of the instrument from the interest accrued added to the liability component (item D18 of Technical Pronouncement CPC 37).

IAS 34 – Interim Financial Reporting (Technical Pronouncement CPC 21 – Interim Statement)

IG37. Standard IAS 34 (Technical Pronouncement CPC 21) must be applied when the entity is required to, or opts to, present interim accounting information in accordance with IFRSs. Therefore, neither IAS 34 (CPC 21) nor Technical Pronouncement CPC 37 require the entity to:
(a) present interim financial statements that comply with the provisions of IAS 34 (Technical Pronouncement CPC 21); or (b) prepare new versions of interim financial statements presented in accordance with previous accounting practices. However, if the entity prepares an interim financial statement in accordance with IAS 34 (Technical Pronouncement CPC 21) for a part of the period covered by its first IFRS financial statements, the entity must restate the comparative information presented in that statement so that it complies with IFRSs.

IG38. The entity must apply IFRSs in each interim financial statement it presents in accordance with IAS 34 (Technical Pronouncement CPC 21) for the part of the period covered by its first IFRS financial statements. In particular, item 32 of Technical Pronouncement CPC 37 requires the entity to disclose various reconciliations (see IG Example 10).

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

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

IG Example 10 – Interim Statement

Context
The entity “R”’s first IFRS financial statements correspond to the period ended on December 31, 2010, and its first interim accounting disclosure in accordance with IAS 34 (Technical Pronouncement CPC 21) corresponds to the quarter ended on March 31, 2010. Entity “R” prepared its annual financial statements for the year ended December 31, 2009, using previous accounting practices, as well as quarterly disclosures throughout the year 2009.

Application of Requirements
In each quarterly interim financial statement of 2010, entity “R” included reconciliations:
(a) of its equity under previous accounting practices at the end of the comparative quarter of 2009 with its equity in accordance with IFRSs on the same date; and (b) of its income and comprehensive income under previous accounting practices for the comparable quarter of 2009 (current and year-to-date) with the total income and total comprehensive income in accordance with IFRSs.

In addition to the reconciliation required by items (a) and (b) above and the disclosures required by IAS 34 (Technical Pronouncement CPC 21), entity “R”’s interim financial statement for the first quarter of 2010 must include reconciliations (or cross-references to another published document that includes such reconciliations) of:
(a) its equity under previous accounting practices on January 1, 2009, and on December 31, 2009, with its equity on such dates in accordance with IFRSs; and (b) its income and comprehensive income for 2009 under previous accounting practices with its total income and total comprehensive income for 2009 in accordance with IFRSs.

Each of the above reconciliations must provide sufficient details to enable users to understand the material adjustments in the balance sheet, income statement, and statement of comprehensive income.
Entity “R” must also clarify material adjustments in the statement of cash flows.
If entity “R” becomes aware of errors committed when using previous accounting practices, the reconciliation must distinguish the correction of these errors from changes in accounting policy.
If entity “R”, in its most recent annual financial statements under previous accounting practices, did not disclose material information necessary to understand the current interim period, its 2010 interim financial statements must disclose such information or include a cross-reference to another published document containing it (item 33 of Technical Pronouncement CPC 37). The same procedures must be used for the statement of value added.

IG39-IG 51. (Eliminated).

IAS 39 – Financial Instruments: Recognition and Measurement (CPC 38 – Financial Instruments: Recognition and Measurement)

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

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

IG52. The entity must recognize and measure all financial assets and liabilities in its opening IFRS balance sheet in accordance with IAS 39 (Technical Pronouncement CPC 38), except as specified in items B2 to B6 of Technical Pronouncement CPC 37, regarding derecognition and hedge accounting.

Recognition

IG53. The entity must recognize all financial assets and liabilities (including all derivatives) that qualify for recognition in accordance with CPC 38 (IAS 39) (and that have not yet qualified for derecognition in accordance with IAS 39), except for non-derivative financial assets and liabilities derecognized under previous accounting practices before January 1, 2004, for which the entity has not applied the provisions of item B3 (see items B2 and B3 of Technical Pronouncement CPC 37). For example, an entity that does not apply item B3 should not recognize assets transferred in a securitization, transfer, or other derecognition transaction that occurred before January 1, 2004, if those transactions qualified for derecognition in accordance with previous accounting practices. However, if the entity uses the same securitization agreement (or other derecognition arrangement) for transfers after January 1, 2004, such subsequent transfers qualify for derecognition only if they meet the derecognition criterion of IAS 39 (Technical Pronouncement CPC 38).

IG54. The entity should not recognize a financial asset or financial liability that does not qualify for recognition by IAS 39, or that has already qualified for derecognition in accordance with IAS 39.

Embedded Derivative

IG55. When IAS 39 (Technical Pronouncement CPC 38) requires the entity to separate an embedded derivative from the host contract, the initial carrying amount of the components, at the date the instrument first meets the IAS 39 criterion, must reflect the circumstances of that date (IAS 39, item 11). If the entity cannot reliably determine the initial carrying amount of the embedded derivative and the host contract, it must treat the entire combined contract as a financial instrument held for immediate trading (IAS 39, item 12). This must result in measurement at fair value (except when the entity cannot determine a reliable fair value; see item 46(c) of IAS 39), whose changes in fair value must be recognized in the period's profit or loss.

Measurement

IG56. In preparing its opening IFRS balance sheet, the entity must apply the IAS 39 criterion to identify, based on facts and circumstances existing at the date of transition to IFRSs, those financial assets and liabilities that must be measured at fair value and those that must be measured at amortized cost. The resulting classifications must be applied retrospectively.

IG57. For those financial assets and financial liabilities measured and amortized at cost in the opening IFRS balance sheet, the entity must determine their costs based on the circumstances existing when these financial assets and liabilities first met the recognition criteria of IAS 39 (Technical Pronouncement CPC 38). However, if the entity acquired such financial assets and liabilities in a past business combination, their respective carrying amounts under previous accounting practices immediately after the business combination must be taken as the deemed cost of the same on that date in accordance with IFRSs (item C4(e) of Technical Pronouncement CPC 37).

IG58. The entity’s estimates at the date of transition to IFRSs of impairment losses on financial assets measured at amortized cost must be consistent with the estimates made for the same date under previous accounting practices (after adjustments to reflect any difference in accounting policy), unless there is objective evidence that its assumptions were wrong (item 14 of Technical Pronouncement CPC 37). The entity must treat the impact of subsequent revisions in such estimates as impairment losses in the period in which the revisions occurred (or as reversal of impairment losses when the criterion of IAS 39 (Technical Pronouncement CPC 38) is met).

Transition Adjustments

IG58A. The entity must treat an adjustment to the carrying amount of a financial asset or liability as a transition adjustment, recognized in accumulated profits or losses of its opening balance sheet at the date of transition to IFRSs, only to the extent that it results from the adoption of IAS 39 (Technical Pronouncement CPC 38). Because all derivatives (except those financial guarantee contracts or designated as effective hedging instruments) are measured at fair value through profit or loss, the differences between the previous carrying amount (which may be zero) and the fair value of the derivatives must be recognized as an adjustment to the balance of accumulated profits or losses at the beginning of the fiscal year in which IAS 39 was first applied (except for derivatives that are financial guarantee contracts or designated as effective hedging instruments).

IG58B. IAS 8 (Technical Pronouncement CPC 23) must be applied to adjustments resulting from changes in accounting estimates. When the entity is unable to determine whether a specific part of the adjustments is a transition adjustment or a change in estimate, it must treat that part as a change in accounting estimate in accordance with IAS 8 and make the appropriate disclosures (items 32 to 40 of IAS 8 – Technical Pronouncement CPC 23).

IG59. The entity may, in accordance with previous accounting practices, have measured investments at fair value and recognized the revaluation gain outside the period's profit or loss. When the investment is classified at fair value with effects recognized in the period's profit or loss, the pre-IAS 39 (Technical Pronouncement CPC 38) revaluation gain that was recognized outside the period's profit or loss must be reclassified to accumulated profits or losses upon initial application of IAS 39. If, upon initial application of IAS 39, the investment is classified at fair value through other comprehensive income, then the pre-IAS 39 revaluation gain must be recognized in a separate component of equity. Subsequently, the entity must recognize gains and losses on financial assets in other comprehensive income (except dividends that must be recognized in profit or loss) and must accumulate them in other comprehensive income, in a separate account of equity. Upon subsequent derecognition, the entity may transfer the separate component of equity to other equity accounts.

Hedge Accounting

IG60. Items B4 to B6 of Technical Pronouncement CPC 37 deal with hedge accounting. The designation and documentation of the hedging relationship must be completed at the date of transition to IFRSs, or before it, when this hedging relationship qualifies for hedge accounting from that date. Hedge accounting may be applied prospectively only from the date on which the hedging relationship is fully designated and documented.

IG60A. The entity, in accordance with previous accounting practices, may have deferred or not recognized gains and losses on fair value hedge regarding a hedged item that is not measured at fair value. Regarding fair value hedge, the entity must adjust the carrying amount of the hedged item at the date of transition to IFRSs. The adjustment will be the lesser of the following:
(a) the portion of the accumulated change in fair value of the hedged item that reflects the designated protected risk and was not recognized by previous accounting practices; and (b) the portion of the accumulated change in fair value of the hedging instrument that reflects the designated protected risk under previous accounting practices and that (i) was not recognized or (ii) was deferred in the balance sheet as an asset or liability.

IG60B. The entity may, in accordance with previous accounting practices, have deferred gains and losses on cash flow hedge of a forecast transaction. If, at the date of transition to IFRSs, the protected forecast transaction is not highly probable, but is expected to occur, the total deferred gain or loss must be recognized in equity. Any net accumulated gain or loss that was reclassified to equity upon initial application of IAS 39 must remain in equity until (a) subsequently the forecast transaction results in the recognition of a non-financial asset or liability, (b) the forecast transaction affects the period's profit or loss, or (c) subsequent changes in circumstances occur and the forecast transaction is no longer expected to occur, in which case any net cumulative gain or loss resulting must be reclassified from equity to the period's profit or loss. If the hedging instrument is held, but the hedge does not qualify as a cash flow hedge in accordance with IAS 39, it is not appropriate to initiate hedge accounting from the date of transition to IFRSs.

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.gov.br/cvm

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

IAS 40 – Investment Property (Technical Pronouncement CPC 28 – Investment Property)

IG61. An entity that adopts the fair value model provided for in IAS 40 (Technical Pronouncement CPC 28) must measure its non-current investments in properties at fair value on the date of transition to IFRSs. The transitional requirements of IAS 40 (Technical Pronouncement CPC 28) are not applicable in this case (item 9 of Technical Pronouncement CPC 37).

IG62. An entity that adopts the cost model provided for in IAS 40 (Technical Pronouncement CPC 28) must apply the provisions in items IG7 to IG13 regarding fixed assets.

Explanation of the transition to IFRSs

IG63. Items 24(a) and (b), 25 and 26 of Technical Pronouncement CPC 37 require that the first-time adopter disclose reconciliations that provide sufficient details to enable users to understand the material adjustments in the balance sheet, income statement, statement of comprehensive income and, if applicable, in the statement of cash flows. Items 24(a) and 24(b) require specific reconciliations of equity, profit or loss and total comprehensive income. IG Example 11 shows how to meet these requirements.

IG Example 11 – Reconciliation of equity, profit or loss and total comprehensive income

Context
An entity adopted IFRSs for the first time in 2010, with the date of transition to IFRSs being January 1, 2009. Its last financial statements under previous accounting practices correspond to the year ended December 31, 2009.

Application of requirements
The entity's first IFRS financial statements include the reconciliations and respective explanatory notes, as shown below.

Among other things, this example includes the reconciliation of equity at the date of transition to IFRSs (January 1, 2009). IFRSs also require a reconciliation at the end of the last period presented under previous accounting practices (not included in this example).

In practice, this example may be useful to include cross-references to accounting policies and support analyses that provide additional explanations of the adjustments shown in the reconciliation below.

If the first-time adopter becomes aware of errors that occurred under previous accounting practices, the reconciliations must distinguish the correction of errors from changes in accounting policies (item 26 of Technical Pronouncement CPC 37). This example does not illustrate the disclosure of error correction.

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

This example does not represent Brazilian reality immediately before the initial adoption of IFRSs.

Reconciliation of equity on January 1, 2009 (transition date)

Accounts | Previous accounting practices $ | Effect of transition to IFRSs $ | IFRSs $ (1) Fixed assets | 8,299 | 100 | 8,399 (2) Goodwill | 1,220 | 150 | 1,370 (2) Intangible assets | 208 | (150) | 58 (3) Financial assets | 3,471 | 420 | 3,891 Total non-current assets | 13,198 | 520 | 13,718 Customers and other receivables | 3,710 | 0 | 3,710 (4) Inventories | 2,962 | 400 | 3,362 (5) Other receivables | 333 | 431 | 764 Cash and cash equivalents | 748 | 0 | 748 Total current assets | 7,753 | 831 | 8,584 Total assets | 20,951 | 1,351 | 22,302 Loans and financing | 9,396 | 0 | 9,396 Suppliers and other payables | 4,124 | 0 | 4,124 (6) Employee benefits | 0 | 66 | 66 (7) Restructuring provision | 250 | (250) | 0 Current taxes payable | 42 | 0 | 42 (8) Deferred taxes | 579 | 460 | 1,039 Total liabilities | 14,391 | 276 | 14,667 Total assets less liabilities | 6,560 | 1,075 | 7,635 Share capital | 1,500 | 0 | 1,500 (5) Hedge adjustments | 0 | 302 | 302 (9) Retained earnings | 5,060 | 773 | 5,833 Total equity | 6,560 | 1,075 | 7,635

Explanatory notes of the reconciliation of equity on January 1, 2009:
(1) Depreciation under previous accounting practices was influenced by tax requirements, however, under IFRSs it must reflect the useful life of the assets. The accumulated adjustment increased the carrying amount of fixed assets by $100.
(2) Intangible assets under previous accounting practices included $150 relating to items transferred to goodwill for future profitability because they did not qualify for recognition as intangible assets in accordance with IFRSs.
(3) Financial assets became classified at fair value through profit or loss in accordance with IFRSs and are accounted for at fair value of $3,891. Under previous accounting practices they were accounted for at cost of $3,471. The resulting gain of $294 ($420 less deferred tax of $126) was included in retained earnings (via accumulated profits).

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

(4) Inventories include $400 of indirect, fixed and variable production costs, in accordance with IFRSs. Under previous accounting practices indirect costs were excluded.
(5) Unrealized gains of $431 on forward contracts in foreign currency were recognized in accordance with IFRSs, but not under previous accounting practices. The resulting gain of $302 ($431 less deferred tax of $129) was included in hedge adjustments because the contracts are intended to protect projected sales.
(6) The pension liability of $66 was recognized in accordance with IFRSs, but not under previous accounting practices, as the cash basis was used.
(7) The restructuring provision of $250 relating to head office activities was recognized under previous accounting practices, but did not qualify for recognition as a liability in accordance with IFRSs.
(8) The following variations increased the deferred tax liability as follows:
Hedge adjustments (note 5) $129
Retained earnings $331
Increase in deferred tax $460
Because the tax base of the items reclassified from intangible assets to goodwill for future profitability (note 2), on January 1, 2009, was equal to their carrying amounts on that date, their reclassification did not affect the deferred tax liability.
(9) The adjustments in accumulated profits (retained earnings, thereafter) were as follows:
Depreciation (note 1) $100
Financial assets (note 3) $420
Indirect production costs (note 4) $400
Pension liability (note 6) $(66)
Restructuring provision (note 7) $250
Effect of taxes $(331)
Total adjustment in accumulated profits (retained earnings) $773

Reconciliation of profit for 2009

Accounts | Previous accounting practices $ | Effect of transition to IFRSs $ | IFRSs $ Revenues | 20,910 | 0 | 20,910 (1,2,3) Cost of sales | (15,283) | (97) | (15,380) Gross profit | 5,627 | (97) | 5,530 (6) Other revenues | 0 | 180 | 180 (1) Distribution expenses | (1,907) | (30) | (1,937) (1,4) Administrative expenses | (2,842) | (300) | (3,142) Financial revenues | 1,446 | 0 | 1,446

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

Financial expenses | (1,902) | 0 | (1,902)
Profit before taxes | 422 | (247) | (175)
(5) Income taxes | (158) | 74 | (84)
Period result | 264 | (173) | 91

Reconciliation of comprehensive income for 2009

Accounts | Previous accounting practices $ | Effect of transition to IFRSs $ | IFRSs $ Period result | 264 | (173) | 91 (7) Cash flow hedge | 0 | (40) | (40) (8) Tax on other comprehensive income | 0 | (29) | (29) Other comprehensive income | 0 | (69) | (69) Total comprehensive income | 264 | (242) | 22

Explanatory notes of the reconciliation of profit and comprehensive income for 2009:
(1) The pension liability was recognized in accordance with IFRSs, however it was not recognized under previous accounting practices. During 2009, it increased by $130, causing an increase of $50 in cost of sales, $30 in distribution expenses and $50 in administrative expenses.
(2) Cost of sales is higher by $47 because, under IFRSs, inventories include indirect production costs (fixed and variable) and not under previous accounting practices.
(3) Depreciation, under previous accounting practices, was influenced by tax requirements, but under IFRSs, it must reflect the useful life of the assets. The effect on the 2009 result was not material.
(4) Under previous accounting practices, a restructuring provision of $250 was recognized on January 1, 2009, which qualified for recognition under IFRSs only on December 31, 2009. In accordance with IFRSs, this increased 2009 administrative expenses.
(5) Adjustments 1 to 4 above led to a reduction of $128 in deferred income tax expense.
(6) Financial assets at fair value through profit or loss in accordance with IFRSs had a value increase of $180 during 2009. They were accounted for at cost under previous accounting practices. Changes in fair value were included in 'other revenues'.
(7) The fair value of foreign currency forward contracts that constituted an effective hedge of projected transactions decreased by $40 during the year 2009.
(8) Adjustments 6 and 7 above led to an increase of $29 in deferred income tax expense.

Explanation of material adjustments in the 2009 statement of cash flows:

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

Income taxes of $133, paid during 2009, are classified as cash from operating activities in accordance with IFRSs, however they were included in a separate category of cash flow for taxes, in accordance with previous accounting practices. There is no other material difference between the statement of cash flows presented in accordance with IFRSs and those presented in accordance with previous accounting policies.

IG64-65. (Eliminated).
(Items IG66 to IG200 have been reserved for possible guidance on future standards.)

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

Interpretations

IFRIC 1 – Changes in Existing Decommissioning, Restoration and Similar Liabilities (Technical Interpretation ICPC 12 – Changes in Liabilities for Decommissioning, Restoration and Other Similar Liabilities)

IG201. IAS 16 (Pronouncement 27 – Fixed Assets) requires that the cost of fixed assets include the initial estimate of the costs of decommissioning and removing the asset and restoring the site it occupies. IAS 37 requires that the corresponding liability (both initial and subsequent) be measured at the amount necessary to settle the present obligation at the end of the reporting period, reflecting the current market-based discount rate.

IG202. IFRIC 1 (Technical Interpretation ICPC 12 – Changes in Liabilities for Decommissioning, Restoration and Other Similar Liabilities) requires that variations in decommissioning, restoration and other similar liabilities be added to or deducted from the cost of the corresponding assets, subject to specific conditions. The depreciable value thus calculated must be depreciated in accordance with the useful life of the corresponding assets, with the periodic update of the corresponding discounted liabilities recognized in profit or loss in the period in which it is incurred.

IG203. Item D21 of Technical Pronouncement CPC 37 provides a transitional exemption. Instead of accounting for variations retrospectively, entities may include in the depreciated cost of the assets the value calculated by discounting the corresponding liability at the date of transition to IFRSs backwards, and depreciating it from when the liability was first incurred. IG Example 201 illustrates the effects of applying this exemption, assuming that the entity accounts for its fixed assets by the cost model.

IG Example 201 – Variations in present obligations for decommissioning, restoration and other similar liabilities

Context
The entity's first IFRS financial statements correspond to the period ended December 31, 2010 and include comparative information only for 2009. Therefore, the date of transition to IFRSs is January 1, 2009.
The entity acquired a power plant on January 1, 2006, with a useful life of 40 years.
At the date of transition to IFRSs, the entity estimates the decommissioning costs to be in 37 years at $470 and estimates that a discount rate (adjusted for risk) of 5% per annum is appropriate for this liability. The entity considers that this appropriate discount rate has not changed since January 1, 2006.

Application of requirements

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

The decommissioning liability to be recognized at the transition date is $77 ($470 discounted for 37 years at 5% per annum).
Discounting this liability for another three years, i.e., to determine its value on January 1, 2006, the present value of the decommissioning liability at the date of acquisition, to be included in the cost of the asset, results in $67. The accumulated depreciation on this increase in the cost of the asset will then be $67 x 3/40 = $5. The amount recognized in the opening IFRS balance sheet at the date of transition to IFRSs (January 1, 2009) is, in summary:
Decommissioning cost included in the cost of the asset $67 Accumulated depreciation $(5) Decommissioning liability $(77) Net assets/retained earnings $(15)

IG204-206. (Eliminated).

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

EXPLANATORY NOTE TO THE PRONOUNCEMENT

NE1. This explanatory note accompanies, but is not an integral part of the Pronouncement. This note is intended to highlight situations where the Pronouncement has certain differences with respect to the International Accounting Standards issued by the IASB and, after that, to comment on them.

NE2. Item 8A does not exist in the IASB version; thus, the requirement that the early application of a new IFRS is conditioned on having this new IFRS, even if not mandatory, been admitted by the Accounting Pronouncements Committee (CPC) and, when applicable by the regulatory body to which the entity is subordinate, exists in Brazil, but not necessarily in other jurisdictions. For this same reason, the example contained in said item 8A also highlights this condition.

NE3. Item 29 highlights that Brazilian accounting practices already provide for the designation, recognition, classification and measurement of financial assets or liabilities in such a way that they become compatible with IFRSs. In this way, the option given by items 29 and 29A of IFRS 1, were not accepted by the CPC when issuing the first version of Technical Pronouncement CPC 37. However, this version has come to accept the change of classification as admitted by IFRSs (item 29 and D19) in the initial adoption.

NE4. Items 30 and 31 do not allow the option of adopting the deemed cost for intangible assets, investments in subsidiaries, jointly controlled entities, associates or other assets other than fixed assets and investment property. This option exists in IFRSs, but was restricted by the CPC considering the previous accounting practice adopted in Brazil.

NE5. Item 34A does not exist in the IASB version; thus, this requirement exists in Brazil, but not necessarily in other jurisdictions.

NE6. Item 35 does not exist in the IASB version as is; thus, this requirement exists in Brazil, but not necessarily in other jurisdictions.

NE7. Items 36 to 39A were eliminated in the CPC 37 version, as they dealt with the validity of the various pronouncements issued by the IASB over previous years.

NE8. Item 39B was eliminated in the CPC 37 version, as it refers to changes resulting from IFRS 9, which is only mandatory for application by the IASB in 2013. This standard has not yet been received by the Accounting Pronouncements Committee. For the same reason, the changes made in items 29, B1 and D19 resulting from IFRS 9, made in IFRS 1, were not made in CPC 37, as well as items 29A, D19A to C, E1 and E2, are eliminated.

NE9. The special provision of item 40 does not exist in the IASB version; thus, this requirement exists in Brazil, but not necessarily in other jurisdictions.

CVM RESOLUTION NO. 75, OF MARCH 22, 2022

NE10. The mention in items C4(c)(i) and C4(i) regarding the possibility of deducting goodwill directly from equity that would be allowed by previous accounting practice, existing in IFRS 1, was eliminated because this possibility was never provided for in previous Brazilian accounting practice.

NE11. The permission for retroactivity provided for in items D2 and D3 of IFRS 1 does not exist in CPC 37 due to Technical Pronouncement CPC 10 – Share-based Payment having the validity given by regulatory bodies in a period different from the provision contained in the IASB version.

NE12. Item D7(b) was eliminated from CPC 37, as it deals with the option of adopting deemed cost for intangible assets, not allowed in Brazilian accounting practice, as mentioned in NE4.

NE13. The option given by the IASB in item D8 related to deemed cost was eliminated for the purposes of CPC 37.

NE14. The original version of Technical Pronouncement CPC 37 prevented the retroactive adoption of Technical Pronouncement CPC 15 – Business Combinations beyond the date of transition to IFRSs. In this version, the new wording of item C1 now allows this retroactivity, as is also permitted by the IASB.

NE15. The IASB, through its document called Statement of Best Practice: Working Relationships between the IASB and other Accounting Standard-Setters, admits that jurisdictions may limit the options given by it, as well as that jurisdictions may make additional information requirements beyond those required by it and declares that this does not prevent the financial statements thus prepared from being declared as being in accordance with the International Accounting Standards issued by it.

NE16. Thus, the existence of the differences commented on in items NE2 to NE14 does not mean that the cash flow statements prepared in accordance with this Pronouncement are not in conformity with IASB standards.

Lineage: No known changes