CVM Resolution No. 89 of May 6, 2022 — CVM — BR

SECURITIES 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.cvm.gov.br

CVM RESOLUTION NO. 89, OF MAY 6, 2022
Approves the Technical Pronouncements Review Document No. 20, issued by the Accounting Pronouncements Committee – CPC.

The PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION OF BRAZIL - CVM makes public that the Board, in a meeting held on May 4, 2022, based on §§ 3 and 5 of art. 177 of Law No. 6.404, of December 15, 1976, combined with items II and IV of § 1 of art. 22 of Law No. 6.385, of December 7, 1976, APPROVED the following Resolution:

Art. 1. It makes mandatory for publicly-held companies the Technical Pronouncements Review Document No. 20 issued by the Accounting Pronouncements Committee – CPC, as per Annex “A” to this Resolution.

Art. 2. This Resolution enters into force on June 1, 2022, applying to fiscal years beginning on or after January 1, 2023, except as provided in the following paragraphs.

§1. Item 1 of Annex “A” to this Resolution shall have its application retroactive to January 1, 2021.

§2. Item 9 of Annex “A” to this Resolution shall have its application on the effective date of the Resolution.

Signed electronically by
Marcelo Barbosa
President

CVM RESOLUTION NO. 89, OF MAY 6, 2022
ANNEX “A”
ACCOUNTING PRONOUNCEMENTS COMMITTEE
TECHNICAL PRONOUNCEMENTS REVIEW – NO. 20/2021

This document establishes changes in Technical Pronouncements due to changes in Classification of Liabilities as Current or Non-Current; Deferral of the temporary exemption from CPC 48; Definition of Accounting Policy; Disclosures of Accounting Policies; and Deferred Taxes related to Assets and Liabilities arising from a Single Transaction. The effectiveness of these changes will be established by the regulatory bodies that approve them, and, for full compliance with international accounting standards, the entity must apply these changes in annual periods beginning on or after January 1, 2023, except for the deferral of the temporary exemption from CPC 48, which must have immediate effect. The document also provides for a correction of an inconsistency identified in the text of Technical Pronouncement CPC 47, which must be applied immediately.

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

Amends items 20A, 20J and 20O in CPC 11 – Insurance Contracts, which shall enter into force with the following wording:

20A CPC 48 deals with the accounting for financial instruments and is effective upon its approval by regulatory bodies. Regulators are recommended that its effectiveness be for annual periods beginning on or after January 1, 2018. However, for an insurer that meets the criteria of item 20B, this pronouncement provides a temporary exemption that permits, but does not require, the insurer to apply CPC 38 – Financial Instruments: Recognition and Measurement instead of CPC 48, for annual periods beginning before January 1, 20232021, unless another date is required or defined by regulatory bodies. An insurer that applies the temporary exemption from CPC 48 must:

20J If the entity does not qualify for the temporary exemption from CPC 48, as a result of the reassessment of qualification (see item 20G(a)), then it is authorized to continue to apply the temporary exemption from CPC 48 only until the end of the annual period that began immediately after the reassessment of qualification. However, the entity must apply CPC 48 for annual periods beginning on or after January 1, 20232021. For example, if the entity determines that it no longer qualifies for the temporary exemption from CPC 48 to apply item 20G(a) on December 31, 2018 (end of its annual period), then the entity is authorized to continue to apply the temporary exemption from CPC 48 only until December 31, 2019.

Temporary exemption from specific requirements of CPC 18

20O Items 35 and 36 of CPC 18 – Investments in Associates, Joint Ventures and Subsidiaries require the entity to apply uniform accounting policies when using the equity method. However, for annual periods beginning before January 1, 20232021, it is permitted, but not required, for the entity to maintain the relevant accounting policies applied by the associate or jointly controlled entity in the following manner:

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2. Amends the concept of “accounting estimates” in item 5, items 32, 34, 38 and 48 and the title of item 32 and includes items 32A, 32B, 34A and 54I in CPC 23 - Accounting Policies, Changes in Accounting Estimates and Errors, which shall enter into force with the following wording:

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

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Accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty.

A change in an accounting estimate is an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status and of the expected future obligations and benefits associated with assets and liabilities. Changes in accounting estimates result from new information or new developments and, therefore, are not corrections of errors.

Estimates Changes in accounting estimates

An accounting policy may require that items in financial statements be measured in a way that involves measurement uncertainty – that is, the accounting policy may require that these items be measured in monetary amounts that cannot be observed directly and must be estimated. In this case, the entity develops an accounting estimate to achieve the objective established by the accounting policy. As a consequence of the uncertainties inherent in business activities, many items in financial statements cannot be measured precisely, but can only be estimated. Developing accounting estimates involves the use of judgments or assumptions. The estimate involves judgments based on the latest available and reliable information. Examples of accounting estimates include For example, estimates may be required of:

(a) adjustment for expected credit losses, applying CPC 48 doubtful debts; (b) net realizable value of an inventory item, applying CPC 16 inventory obsolescence; (c) fair value of an asset or liability, applying CPC 46 financial assets or financial liabilities; (d) depreciation expense for an item of property, plant and equipment, applying CPC 27 useful life of depreciable assets or the expected pattern of consumption of the future economic benefits embodied in these assets; and (e) a provision for obligations arising from warranties, applying CPC 25.

32A. The entity uses measurement information and techniques to develop an accounting estimate. Measurement techniques include estimation techniques (for example, techniques used to measure adjustment for expected credit losses applying CPC 48) and valuation techniques (for example, techniques used to measure the fair value of an asset or liability applying CPC 46).

32B. The term “estimate” in CPC Technical Pronouncements sometimes refers to an estimate that is not an accounting estimate as defined in this Pronouncement. For example, it sometimes refers to information used in the development of accounting estimates.

The entity may need to change an accounting estimate may need revision if changes occur in the circumstances on which the accounting estimate was based or as a result of new information or greater experience. By its nature, a change in a revision of an accounting estimate does not relate to prior periods and is not the correction of an error.

34A. The effects on an accounting estimate of a change in information or a change in a measurement technique are changes in accounting estimates, unless they result from the correction of a prior period error.

38. The prospective recognition of the effect of a change in an accounting estimate means that the change is applied to transactions, other events and conditions from the date of this change in the estimate. A change in an accounting estimate may affect only the results of the current period or the results of both the current period and future periods. For example, the change in the in an adjustment for expected credit losses estimate of doubtful debts affects only the results of the current period and, therefore, is recognized in the current period. However, the change in the estimate of the useful life of a depreciable asset, or in the expected pattern of consumption of the future benefits of this type of asset, affects the depreciation of the current period and each of the future periods during the remaining useful life of the asset. In both cases, the effect of the change related to the current period is recognized as revenue or expense in the current period. The effect, if any, in future periods is recognized as revenue or expense in those future periods.

48. Error corrections differ from changes in accounting estimates. Accounting estimates, by their nature, are approximations that may need change revision as additional information becomes known. For example, the gain or loss recognized at the time of the outcome of a contingency, which previously could not be estimated precisely, does not constitute an error correction.

54I. Technical Pronouncements Review No. 20, approved by the CPC on April 1, 2022, amended the concept of “accounting estimates” in item 5, items 32, 34, 38 and 48 and the subtitle of item 32 and included items 32A, 32B and 34A. The entity must apply the changes of this review as established by the regulatory bodies that approve it, and for full compliance with international accounting standards, the entity must apply this review for annual periods beginning on or after January 1, 2023. The entity shall apply the changes to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the first annual reporting period in which it applies the changes.

3. Includes definition of “accounting policies” in item 7, amends letter e of item 10, item ii of letter c of item 114 and items 117 and 122, includes items 117A to 117E and 139V and excludes items 118, 119 and 121 in CPC 26 (R1) – Presentation of Financial Statements, which shall enter into force with the following wording:

7. The terms below are used in this pronouncement with the following meanings:

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Accounting policies are defined in item 5 of Technical Pronouncement CPC 23 - Accounting Policies, Changes in Accounting Estimates and Error Corrections and the term is used in this Pronouncement with the same meaning.

Complete set of financial statements

The complete set of financial statements includes:

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(e) notes, comprising material accounting policies information and other explanatory information;

Notes
Structure

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Examples of systematic ordering or grouping of the notes include:

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(c) following the order of the accounts of the statement of profit or loss and other comprehensive income and the balance sheet, such as:

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(ii) material accounting policies information significant accounting policies applied (see item 117);

Disclosure of accounting policies information

The entity shall disclose material accounting policy information (see item 7). Accounting policy information is material if, when considered together with other information included in the entity’s financial statements, it can reasonably be expected to influence the decisions that the general purpose financial statement users make based on these financial statements. its significant accounting policies comprising:

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

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

117A. Accounting policy information that relates to immaterial transactions, other events or conditions is immaterial and does not need to be disclosed. Accounting policy information may, however, be material due to the nature of the related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting policy information related to material transactions, other events or conditions is material in itself.

117B. Accounting policy information is expected to be material if the users of the entity’s financial statements need it to understand other relevant information in the financial statements. For example, the entity is likely to consider accounting policy information as material for its financial statements if this information relates to material transactions, other events or conditions and:

(a) the entity changed its accounting policy during the financial reporting period and this change resulted in a material change in the information in the financial statements;

(b) the entity chose the accounting policy from one or more options allowed by the CPC Technical Pronouncements – such a situation could arise if the entity opted to measure investment property at historical cost instead of fair value;

(c) the accounting policy was developed in accordance with CPC 23 in the absence of a CPC Technical Pronouncement that applies specifically;

(d) the accounting policy refers to an area for which the entity must make significant judgments or assumptions when applying an accounting policy, and the entity discloses these judgments or premises in accordance with items 122 and 125; or

(e) the accounting recognition required for them is complex and the users of the entity’s financial statements would not understand these material transactions, other events or conditions – such a situation could arise if the entity applies more than one CPC to a class of material transactions.

177C. Accounting policy information that focuses on how the entity applied the requirements of other CPC Technical Pronouncements to its own circumstances provides entity-specific information that is more useful to the users of the financial statements than standardized information, or information that merely duplicates or summarizes the requirements of the CPC Technical Pronouncements.

177D. If the entity discloses immaterial accounting policy information, such information must not obscure material accounting policy information.

177E. The entity’s conclusion that accounting policy information is immaterial does not affect the disclosure requirements established in other CPC Technical Pronouncements.

[Eliminated]It is important that users are informed about the measurement basis (or bases) used in the financial statements (for example, historical cost, current cost, net realizable value, fair value or recoverable amount) because the basis on which the financial statements are prepared significantly affects users’ analysis. When more than one measurement basis is used in the financial statements, for example, when certain classes of assets are revalued (if legally permitted), it is sufficient to disclose an indication of the categories of assets and liabilities to which each measurement basis was applied.
[Eliminated]In deciding whether a particular accounting policy should or should not be disclosed, management must consider whether its disclosure will provide users with a better understanding of how transactions, other events and conditions are reflected in the reported performance and financial position. Each entity must consider the nature of its operations and the policies that users of its financial statements expect to be disclosed for this type of entity. The disclosure of certain accounting policies is especially useful to users when these policies are selected from alternatives allowed in Technical Pronouncements, Interpretations and Technical Guidance issued by the CPC. An example is the disclosure of whether the entity applies the fair value or cost model for its investment properties (see Technical Pronouncement CPC 28 – Investment Property). Some Technical Pronouncements, Guidance or Technical Interpretations issued by the CPC specifically require the disclosure of certain accounting policies, including choices made by management between different allowed policies. For example, Technical Pronouncement CPC 27 – Property, Plant and Equipment requires the disclosure of the measurement bases used for classes of property, plant and equipment.

COMISSÃO DE VALORES MOBILIÁRIOS
Rua Sete de Setembro, 111/2-5º e 23-34º Andares, Centro, Rio de Janeiro/RJ – CEP: 20050-901 – Brasil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2º, 3º e 4º Andares, Bela Vista, São Paulo/ SP – CEP: 01333-010 – Brasil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4º Andar, Brasília/DF – CEP: 70712-900 – Brasil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br RESOLUÇÃO CVM Nº 89, DE 06 DE MAIO DE 2022

[Eliminated] An accounting policy may be significant due to the nature of the entity's operations, even if the amounts associated with prior and current periods are not material. It is also appropriate to disclose each significant accounting policy that is not specifically required by the Technical Pronouncements, Guidelines, and Interpretations of the CPC, but that has been selected and applied in accordance with Technical Pronouncement CPC 23 – Accounting Policies, Changes in Accounting Estimates and Errors.
The entity shall disclose, together with its significant accounting policy information or in other explanatory notes, the judgments, except those involving estimates (see item 125), that management has made in the process of applying the entity's accounting policies and that have the most significant effect on the amounts recognized in the financial statements.

139V. Technical Pronouncement Revision No. 20, approved by the CPC on April 1, 2022, included the definition of "accounting policies" in item 7, amended item 9 letter e, item 11 letter c item i, and items 117 and 122, included items 117A to 117E and 139V, and excluded items 118, 119, and 121. The effective date of this Revision shall be established by the regulatory bodies that approve it, and for full compliance with international accounting standards, the entity shall apply this revision for annual periods beginning on or after January 1, 2023.

Amends item 21, includes item 44II, and amends item B5 of Appendix B of CPC 40 (R1) – Financial Instruments: Disclosure, which shall enter into force with the following wording:

Other disclosures
Accounting policies

In accordance with item 117 of Technical Pronouncement CPC 26 – Presentation of Financial Statements, the entity shall disclose material accounting policy information in the note on accounting policies, the measurement bases used in the preparation of the financial statements, and other accounting policies used that are relevant to the understanding of these financial statements.
Information about the measurement basis (or bases) for financial instruments used in the preparation of the financial statements is expected to be material accounting policy information.

44II. Technical Pronouncement Revision No. 20, approved by the CPC on April 1, 2022, amended item 21. The effective date of this Revision shall be established by the regulatory bodies that approve it, and for full compliance with international accounting standards, the entity shall apply this revision for annual periods beginning on or after January 1, 2023.

B5. Item 21 requires the disclosure of material accounting policy information, which is expected to include information about the measurement basis for financial instruments used in the preparation of the financial statements and other accounting policies used that are relevant to the understanding of the financial statements. For financial instruments, this disclosure includes:

Amends item 34 letter b and includes item 38 in CPC 49 – Accounting and Accounting Report for Retirement Benefit Plans, which shall enter into force with the following wording:

Disclosure

34. The financial statements of the retirement benefit plan, whether defined benefit or defined contribution, must also contain as a minimum requirement the following information:
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(b) material accounting policy information summary of significant accounting policies; and

38. Technical Pronouncement Revision No. 20, approved by the CPC on April 1, 2022, amended item 34. The effective date of this Revision shall be established by the regulatory bodies that approve it, and for full compliance with international accounting standards, the entity shall apply this revision for annual periods beginning on or after January 1, 2023.

6. Amends item 5 letter e and includes item 60 in CPC 21(R1) – Interim Statement, which shall enter into force with the following wording:

5. Technical Pronouncement CPC 26 – Presentation of Financial Statements defines a complete set of financial statements as including the following components:
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(e) explanatory notes, material accounting policy information comprising significant accounting policies and other explanatory information;

60. Technical Pronouncement Revision No. 20, approved by the CPC on April 1, 2022, amended item 5 letter e. The effective date of this Revision shall be established by the regulatory bodies that approve it, and for full compliance with international accounting standards, the entity shall apply this revision for annual periods beginning on or after January 1, 2023.

7. Amends items (i) and (ii) of letter b of item 15, letters b and c of item 22, and letters a and b of item 24, and includes item (iii) of letter b of item 15, item 22A, letter c of item 24, items 98J, 98K, and 98L, and Example 8 of Appendix B in CPC 32 – Income Taxes, which shall enter into force with the following wording:

Taxable temporary difference

A deferred tax liability shall be recognized for all taxable temporary differences, except for the deferred tax liability that arises from:
(a) initial recognition of goodwill derived from the expectation of future profitability (goodwill); or (b) initial recognition of an asset or liability in a transaction that:
(i) is not a business combination; and
(ii) at the time of the transaction, does not affect either accounting profit or taxable profit (tax loss); and (iii) at the time of the transaction, does not give rise to equal taxable and deductible temporary differences.

Initial recognition of asset or liability

A temporary difference may arise on the initial recognition of an asset or liability; for example, if the entire cost or part of the cost of the asset is not deductible for tax purposes. The accounting method for this temporary difference depends on the nature of the transaction that led to the initial recognition of the asset or liability:
(a) in a business combination, the entity shall recognize any deferred tax liability or asset and this affects the total goodwill derived from the expectation of future profitability or gain on a bargain purchase recognized (see item 19); (b) if the transaction affects accounting profit or taxable profit, or gives rise to equal taxable and deductible temporary differences, the entity shall recognize a deferred tax asset or liability and shall recognize the resulting deferred tax expense or income in profit or loss (see item 59); (c) if the transaction is not a business combination, and does not affect either accounting profit or taxable profit and does not give rise to equal taxable and deductible temporary differences, the entity, in the absence of the exceptions provided by items 15 and 24, would recognize the resulting deferred tax asset or liability and adjust the carrying amount of the asset or liability by the same amount. These adjustments would make the financial statements less transparent. Therefore, this Pronouncement does not allow the entity to recognize the resulting deferred tax asset or liability, neither on initial recognition nor subsequently (see the example below). Furthermore, the entity shall not recognize subsequent changes in the unrecognized deferred tax asset or liability as the asset is depreciated.

22A. A transaction that is not a business combination may lead to the initial recognition of an asset and a liability and, at the time of the transaction, does not affect accounting profit or taxable profit. For example, at the commencement date of a lease, a lessee normally recognizes a lease liability and the corresponding amount as part of the cost of a right-of-use asset. Depending on the applicable tax legislation, equal taxable and deductible temporary differences may arise on the initial recognition of the asset and the liability in such a transaction. The exception provided by items 15 and 24 does not apply to these temporary differences, and the entity shall recognize the resulting deferred tax liability and asset.

Deductible temporary difference

A deferred tax asset shall be recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that:
(a) is not a business combination; and
(b) at the time of the transaction does not affect either accounting profit or taxable profit (tax loss); and (c) at the time of the transaction, does not give rise to equal taxable and deductible temporary differences.

98J. Technical Pronouncement Revision No. 20, approved by the CPC on April 1, 2022, amended items (i) and (ii) of letter b of item 15, letters b and c of item 22, and letters a and b of item 24, and included item (iii) of letter b of item 15, item 22A, letter c of item 24, items 98K and 98L, and Example 8 of Appendix B. The effective date of this Revision shall be established by the regulatory bodies that approve it, and for full compliance with international accounting standards, the entity shall apply this revision for annual periods beginning on or after January 1, 2023.

98K. The entity shall apply deferred tax related to assets and liabilities arising from a single transaction to transactions that occur on or after the beginning of the first comparative period presented.

98L. An entity that applies deferred tax related to assets and liabilities arising from a single transaction shall also, at the beginning of the earliest comparative period presented:
(a) recognize a deferred tax asset – to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized – and a deferred tax liability for all deductible and taxable temporary differences associated with:
(i) right-of-use assets and lease liabilities; and (ii) decommissioning, restoration, and similar liabilities and the corresponding amounts recognized as part of the cost of the related asset; and (b) recognize the cumulative effect of the initial application of the amendments as an adjustment to the opening balance of retained earnings (or another component of equity, as appropriate) on that date.

Example 8 - Leases

Lease
The entity (Lessee) enters into a five-year lease contract for a building. The annual lease payments are $100 payable at the end of each year. Before the lease commencement date, the Lessee makes a lease payment of $15 (advance lease payment) and pays direct costs of $5. The implicit interest rate in the lease cannot be readily determined. The Lessee's incremental borrowing rate is 5% per annum. At the commencement date, applying CPC 06 (R2), the Lessee recognizes a lease liability of $435 (measured at the present value of the five lease payments of $100, discounted at an interest rate of 5% per annum). The Lessee measures the right-of-use asset (lease asset) at $455, comprising the initial measurement of the lease liability ($435), the advance lease payment ($15), and the initial direct costs ($5).

Tax law
Tax law allows tax deductions for lease payments (including those made before the commencement date) and initial direct costs when the entity makes these payments. Economic benefits that will flow to the Lessee when it recovers the carrying amount of the lease asset will be taxable. An expected tax rate of 20% will be applied to the period(s) in which the Lessee will recover the carrying amount of the lease asset and settle the lease liability. After considering the applicable tax legislation, the Lessee concludes that the tax deductions it will receive for lease payments relate to the repayment of the lease liability (depending on the applicable tax legislation, an entity may alternatively conclude that the tax deductions it will receive for lease payments refer to the lease asset, in which case no temporary differences would arise on the initial recognition of the lease liability and the related component of the lease asset cost. Consequently, the entity would not recognize deferred tax on initial recognition, but would do so if and when temporary differences arise after initial recognition).

Deferred tax on advance lease payment and initial direct costs The Lessee recognizes the advance lease payment ($15) and the initial direct costs ($5) as components of the cost of the lease asset. The tax base of these components is nil because the Lessee has already received tax deductions for the advance lease payment and initial direct costs when it made these payments. The difference between the tax base (zero) and the carrying amount of each component results in taxable temporary differences of $15 (related to the advance lease payment) and $5 (related to the initial direct costs).

The exemption from recognizing a deferred tax liability in item 15 does not apply because the temporary differences arise from transactions that, at the time of the transactions, affect the Lessee's taxable profit (i.e., the tax deductions the Lessee received when it made the advance lease payment and the paid initial direct costs reduced its taxable profit). Consequently, the Lessee recognizes a deferred tax liability of $3 ($15 × 20%) and $1 ($5 × 20%) for the taxable temporary differences related to the advance lease payment and the initial direct costs, respectively.

Deferred tax on the lease liability and related component of the lease asset cost At the commencement date, the tax base of the lease liability is nil because the Lessee will receive tax deductions equal to the carrying amount of the lease liability ($435). The tax base of the related component of the lease asset cost is also nil because the Lessee will not receive any tax deduction for the recovery of the carrying amount of this component of the lease asset cost ($435). The differences between the carrying amounts of the lease liability and the related component of the lease asset cost ($435) and their tax bases of zero result in the following temporary differences at the commencement date:
(a) a taxable temporary difference of $435 associated with the lease asset; and (b) a deductible temporary difference of $435 associated with the lease liability.
The exemption from recognizing a deferred tax asset and liability in items 15 and 24 does not apply because the transaction gives rise to equal taxable and deductible temporary differences. The Lessee concludes that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. Consequently, the Lessee recognizes a deferred tax asset and a deferred tax liability, each of $87 ($435 × 20%), for the deductible and taxable temporary differences.

Summary of recognized deferred tax
The table below summarizes the deferred tax that the Lessee recognizes on the initial recognition of the lease (including the advance lease payment and initial direct costs):

Applying item 22(b) of CPC 32, the Lessee recognizes deferred tax assets and liabilities as illustrated in this example and recognizes the resulting deferred tax income or expense in profit or loss.

Amends item B1 letter g and includes items 39AH and B14 and item B1 letter i in CPC 37 (R1) – Initial Adoption of International Accounting Standards, which shall enter into force with the following wording:

39AH. Technical Pronouncement Revision No. 20, approved by the CPC on April 1, 2022, amended item B1 letter g and included item B14 and item B1 letter i. The effective date of this Revision shall be established by the regulatory bodies that approve it, and for full compliance with international accounting standards, the entity shall apply this revision for annual periods beginning on or after January 1, 2023.

B1. The entity shall apply the following exceptions:
(g) government loans (items B10 to B12); and
(i) deferred taxes related to decommissioning, restoration, and similar liabilities (item B14).

Deferred tax related to leases and decommissioning, restoration, and similar liabilities

B14. Items 15 and 24 of CPC 32 exempt the entity from recognizing a deferred tax asset or liability in specific circumstances. Despite this exemption, at the date of transition to CPC Technical Pronouncements, a first-time adopter shall recognize a deferred tax asset – to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized – and a deferred tax liability for all deductible and taxable temporary differences associated with:
(a) right-of-use assets and lease liabilities; and (b) decommissioning, restoration, and similar liabilities and the corresponding amounts recognized as part of the cost of the related asset.

9. Amends item 29 letter a in CPC 47 – Revenue from Contracts with Customers, which shall enter into force with the following wording:

29. When assessing whether the entity's promises to transfer goods or services to the customer are separately identifiable in accordance with item 27(b), the objective is to determine whether the nature of the promise, within the context of the contract, is to transfer each of those goods or services individually or, instead, to transfer a combined item or items for which the promises of goods and services are inputs.
Factors that indicate that two or more promises to transfer goods or services to the customer are not separately identifiable include, but are not limited to, the following:
(a) the entity does not provide a significant service of integrating the good or service, together with other goods or services promised in the contract, into the bundle of goods or services that represent the combined products contracted for by the customer. In other words, the entity is not using the good or service as an input to produce or deliver the combined products specified by the customer. The outputs or combined outputs may include more than one phase, element, or unit;

Lineage: No known changes