CVM Resolution No. 90 of May 20, 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. 90, OF MAY 20, 2022
Approves the Consolidation of Technical Pronouncement CPC 01(R1) of the Accounting Pronouncements Committee – CPC, which deals with impairment of assets.

THE PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION OF BRAZIL - CVM makes public that the Board, in a meeting held on April 14, 2022, based on §§ 3 and 5 of art. 177 of Law No. 6.404, of December 15, 1976, combined with items II and IV of § 1 of art. 22 of Law No. 6.385, of December 7, 1976, as well as arts. 5 and 14 of Decree No. 10.139, of November 28, 2019,

APPROVED the following Resolution:

Art. 1. It makes mandatory for publicly-held companies the Technical Pronouncement CPC 01(R1), which deals with impairment of assets, issued by the Accounting Pronouncements Committee – CPC, as consolidated in Annex “A” to this Resolution.

Art. 2. CVM Deliberation No. 639, of October 7, 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. 90, OF MAY 20, 2022
ANNEX “A”
ACCOUNTING PRONOUNCEMENTS COMMITTEE
TECHNICAL PRONOUNCEMENT CPC 01 (R1)
Impairment of Assets
Correlation to International Accounting Standards – IAS 36 (BV2010)

Summary Item
OBJECTIVE 1
SCOPE 2 – 5
DEFINITIONS 6
IDENTIFYING AN ASSET THAT MAY BE IMPAIRED 7 – 17 MEASURING RECOVERABLE AMOUNT 18 – 57 Measurement of the recoverable amount of an intangible asset with an indefinite useful life 24 Fair value less costs of disposal 25 – 29 Value in use 30 – 57 Basis for estimates of future cash flows 33 – 38 Composition of estimates of future cash flows 39 – 53 Future cash flows in foreign currency 54 Discount rate 55 – 57 RECOGNITION AND MEASUREMENT OF AN IMPAIRMENT LOSS 58 – 64 CASH-GENERATING UNIT AND GOODWILL 65 – 108 Identifying the cash-generating unit to which an asset belongs 66 – 73 Recoverable amount and carrying amount of a cash-generating unit 74 – 103 Goodwill 80 – 99 Allocation of goodwill to a cash-generating unit 80 – 87 Testing a cash-generating unit with goodwill for impairment 88 – 95

CVM RESOLUTION NO. 90, OF MAY 20, 2022
Timing of impairment tests 96 – 99
Corporate assets 100 – 103
Impairment in a cash-generating unit 104 – 108 REVERSAL OF AN IMPAIRMENT LOSS 109 – 125 Reversal of an impairment loss for an individual asset 117 – 121 Reversal of an impairment loss for a cash-generating unit 122 – 123 Reversal of an impairment loss of goodwill 124 – 125 DISCLOSURE 126 – 136 Estimates used to measure the recoverable amount of a cash-generating unit containing goodwill or an intangible asset with an indefinite useful life 134 – 140F TRANSITIONAL PROVISIONS 141 APPENDICES A, B and C

Objective

The objective of this Technical Pronouncement is to establish procedures that an entity should apply to ensure that its assets are carried at amounts that do not exceed their recoverable amounts. An asset is carried at an amount that exceeds its recoverable amount if its carrying amount exceeds the amount to be recovered from use or sale of the asset. If that is the case, the asset is regarded as impaired and the Technical Pronouncement requires the entity to recognise an impairment loss. The Technical Pronouncement also specifies when an entity should reverse an impairment loss and establishes the disclosures required.

Scope
2. This Pronouncement shall be applied in accounting for impairment losses on all assets, except:
(a) inventories (see CPC 16 – Inventories);
(b) contract assets and assets arising from costs to obtain or fulfil a contract that are recognised in accordance with CPC 47 – Revenue from Contracts with Customers; (c) deferred tax assets (see Technical Pronouncement CPC 32 – Income Taxes);

CVM RESOLUTION NO. 90, OF MAY 20, 2022
(d) assets arising from employee benefits (see Technical Pronouncement CPC 33 – Employee Benefits); (e) financial assets that are within the scope of CPC 48 – Financial Instruments; (f) investment property that is measured at fair value (see Technical Pronouncement CPC 28 – Investment Property); (g) biological assets related to agricultural activity within the scope of Technical Pronouncement CPC 29 – Biological Assets and Agricultural Produce that are measured at fair value less costs to sell; (h) deferred acquisition costs and intangible assets arising from contractual rights of insurance companies contained in insurance contracts within the scope of Technical Pronouncement CPC 11 – Insurance Contracts; and (i) non-current assets (or disposal groups classified as held for sale) classified as held for sale in accordance with Technical Pronouncement CPC 31 – Non-current Assets Held for Sale and Discontinued Operations.

This Technical Pronouncement does not apply to inventories, assets arising from construction contracts, deferred tax assets, assets arising from employee benefit plans or assets classified as held for sale (or included in a group of assets that is classified as held for sale) because the applicable CPC Technical Pronouncements in force for those assets contain guidance for recognition and measurement of those assets.
This Technical Pronouncement is applied to financial assets classified as:
(a) subsidiaries, as defined in Technical Pronouncement CPC 36 – Consolidated Financial Statements; (b) associates, as defined in Technical Pronouncement CPC 18 – Investments in Associates, Jointly Controlled Entities and Controlled Entities; and (c) jointly controlled entities, as defined in Technical Pronouncement CPC 19 – Joint Arrangements. For impairment losses with other financial assets, CPC 48 – Financial Instruments shall be applied.
This Pronouncement does not apply to financial assets within the scope of CPC 48, investment property measured at fair value, within the scope of CPC 28 – Investment Property, or to biological assets related to agricultural activity measured at fair value less costs to sell within the scope of CPC 29 – Biological Assets and Agricultural Produce. However, this Pronouncement shall be applied to assets that are carried at a revalued amount (fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses) in accordance with other CPC Pronouncements and Brazilian legislation, as per the revaluation model provided for in CPC 27 – Property, Plant and Equipment and CPC 04 – Intangible Assets. The only difference between the fair value of the asset and its fair value less costs of disposal is the incremental direct costs attributable to the disposal of the asset:
(a) if the disposal costs are insignificant, the recoverable amount of the revalued asset is necessarily close to (or slightly greater than) its revalued amount. In this case, after the requirements for accounting for revaluation have been applied, it is unlikely that the revalued asset is not recoverable and, therefore, the recoverable amount does not need to be estimated; (i) (eliminated); (ii) (eliminated); (b) (eliminated); (c) if the disposal costs are not insignificant, the fair value less costs of disposal of the revalued asset is necessarily less than its fair value. Therefore, the revalued asset presents recoverability issues if its value in use is less than its revalued amount. In this case, after applying the revaluation requirements, the entity shall apply this Technical Pronouncement to determine whether the asset may have recoverability issues.

Definitions
6. The following terms are used in this Technical Pronouncement with the specific meanings set out below:
Carrying amount is the amount at which an asset is recognised in the balance sheet after deducting all its accumulated depreciation, amortisation or impairment losses.
A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
Corporate assets are assets, other than goodwill, that contribute, even indirectly, to the future cash flows of both the cash-generating unit under review and other cash-generating units.
Costs of disposal are incremental costs directly attributable to the disposal of an asset or a cash-generating unit, excluding finance costs and income tax expenses.

CVM RESOLUTION NO. 90, OF MAY 20, 2022
Depreciable, amortisable and exhaustible amount is the cost of an asset, or other amount that substitutes cost in the financial statements, less its residual value.
Depreciation, amortisation and exhaustion is the systematic allocation of the depreciable, amortisable and exhaustible amount of assets over their useful life.
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 CPC 46 – Fair Value Measurement). (Amended by CPC Revision 03) Impairment loss is the amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use. Useful life is:
(a) the period of time during which an entity expects to utilise an asset; or (b) the number of production or similar units expected to be obtained from the asset by the entity.
Value in use is the present value of future cash flows expected to arise from an asset or a cash-generating unit.

Identifying an asset that may be impaired
7. Items 8 to 17 specify when a recoverable amount shall be determined. These requirements use the term “an asset”, but they apply equally to an individual asset or to a cash-generating unit. The other parts of this Technical Pronouncement are structured as follows:
(a) Items 18 to 57 establish requirements for measuring the recoverable amount. These requirements also use the term “an asset”, although they are equally applicable to an individual asset or to a cash-generating unit.
(b) Items 58 to 108 establish requirements for recognition and measurement of impairment losses. Recognition and measurement of impairment losses for individual assets, other than goodwill, shall be observed jointly with items 58 to 64. Items 65 to 108 cover the recognition and measurement of impairment losses for cash-generating units and goodwill. (c) Items 109 to 116 establish requirements for reversal of an impairment loss recognised in prior periods for an asset or a cash-generating unit. Once again these requirements use the term “an asset”, although they are equally applied to an individual asset or a cash-generating unit. Additional requirements for an individual asset are established in items 117 to 121, for a cash-generating unit in items 122 and 123 and for goodwill in items 124 and 125. (d) Items 126 to 133 specify the information to be disclosed about impairment losses and reversals of impairment losses for assets and cash-generating units. Items 134 to 136 specify additional disclosures required for cash-generating units to which goodwill or intangible assets with an indefinite useful life have been allocated for the purpose of recoverable amount testing.

An asset is impaired when its carrying amount exceeds its recoverable amount. Items 12 to 14 describe some indications that such a loss may have occurred. If any of these situations is present, the entity shall make a formal estimate of the recoverable amount. Except as described in item 10, this Technical Pronouncement does not require the entity to make a formal estimate of the recoverable amount if there is no indication of possible impairment.
The entity shall assess at the end of each reporting period whether there is any indication that an asset may have been impaired. If any such indication exists, the entity shall estimate the recoverable amount of the asset.
Regardless of whether there is any indication of impairment, the entity shall:
(a) test, at least annually, the impairment of an intangible asset with an indefinite useful life or an intangible asset not yet available for use, by comparing its carrying amount with its recoverable amount. This impairment test may be performed at any time during a one-year period, provided it is performed, every year, in the same period. Different intangible assets may have their recoverable amount tested in different periods. However, if such intangible assets were initially recognised during the current year, their impairment shall be tested before the end of the current year; and (b) test, annually, the goodwill paid in business combinations, in accordance with items 80 to 99.
The ability of an intangible asset to generate sufficient future economic benefits to recover its carrying amount is usually subject to greater uncertainty in the phase when the asset is not yet available for use than in the phase when it is already available for use. Therefore, this Technical Pronouncement requires the entity to perform an impairment test, at least annually, on an intangible asset that is not yet available for use.
When assessing whether there is any indication that an asset may have been impaired, the entity shall consider, at a minimum, the following indications:
External sources of information
(a) there are observable indications that the value of the asset has decreased significantly during the period, more than would be expected as a result of the passage of time or normal use; (b) significant changes with an adverse effect on the entity have occurred during the period, or will occur in the near future, in the technological, market, economic or legal environment in which the entity operates or in the market to which the asset is used; (c) market interest rates or other market rates of return on investments have increased during the period, and these increases are likely to affect the discount rate used in calculating the value in use of an asset and will materially decrease the recoverable amount of the asset; (d) the carrying amount of the entity’s equity is greater than the market value of its shares; Internal sources of information (e) evidence of obsolescence or physical damage of an asset is available; (f) significant changes with an adverse effect on the entity have occurred during the period, or are expected to occur in the near future, in the extent to which, or the manner in which, an asset is or will be used. These changes include the asset becoming idle or inactive, plans for discontinuance or restructuring of the operation to which an asset belongs, plans for disposal of the asset before the previously expected date and reassessment of the useful life of an asset as finite instead of indefinite; (g) evidence available from an internal report indicates that the economic performance of an asset is or will be worse than expected; Dividend of a subsidiary, jointly controlled entity or associate (h) for an investment in a subsidiary, jointly controlled entity or associate, the investor recognises a dividend arising from that investment and there is available evidence that:
(i) the carrying amount of the investment in the separate financial statements exceeds the carrying amounts of the net assets of the investee recognised in the consolidated financial statements,

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

CVM RESOLUTION NO. 90, OF MAY 20, 2022

including eventual goodwill (goodwill by expectation of future profitability); or (ii) the dividend exceeds the total comprehensive income of the controlled entity, jointly controlled venture or affiliate in the period in which the dividend is declared.

The relationship stated in item 12 is not exhaustive. The entity may identify other indications or sources of information that an asset may have become impaired, requiring the entity to determine its recoverable amount or, in the case of goodwill paid by expectation of future profitability (goodwill), to proceed with the recoverability test in accordance with items 80 to 99.
Evidence from an internal report indicating that an asset may have become impaired includes the existence of:
(a) cash flows to acquire the asset or subsequent cash needs to operate or maintain it, which are significantly higher than originally budgeted; (b) net cash flows realized or operating profits or losses generated by the asset, which are significantly worse than those budgeted; (c) significant decrease in budgeted net cash flows or operating profit, or significant increase in budgeted loss, generated by the asset; or (d) operating losses or net cash outflows arising from the asset, when the numbers of the current period are aggregated with budgeted numbers for the future.
As indicated in item 10, this Technical Pronouncement requires that an intangible asset, with indefinite useful life, or not yet available for use, and the goodwill by expectation of future profitability (goodwill) be tested with respect to the reduction in recoverable amount, at least once a year. Regardless of when the requirements of item 10 are applied, the concept of materiality applies in identifying and verifying the need to estimate the recoverable amount of an asset. For example, if previous calculations indicate that the recoverable amount of an asset is significantly higher than its carrying amount, the entity does not need to estimate the recoverable amount of the asset again, provided that no events have occurred that would eliminate this difference. Similarly, the previous analysis may indicate that the recoverable amount of an asset is not sensitive to one or more of the indications related in item 12.
To illustrate item 15, if market interest rates or other market rates of return on investments increase in the period, the entity does not need to make a formal estimate of the recoverable amount of an asset in the following cases:
(a) if it is unlikely that the discount rate used in the calculation of the value in use of the asset has been affected by the increase in these market rates. For example, increases in short-term interest rates may not have a material effect on the discount rate used for an asset that has a long remaining useful life;

CVM RESOLUTION NO. 90, OF MAY 20, 2022

(b) if it is likely that the discount rate used in the calculation of the value in use of the asset has been affected by the increase in these market rates, however the previous sensitivity analysis of the recoverable amount indicates that:
(i) it is unlikely that there will be a significant decrease in the recoverable amount, because future cash flows will probably also increase (example: in some cases, the entity may be able to demonstrate that it adjusts its revenues to compensate for any increase in market rates); or (ii) it is unlikely that the decrease in recoverable amount will result in a material impairment loss.

If there is an indication that an asset may have suffered impairment, this may indicate that the remaining useful life, the method of depreciation, amortization and depletion or the residual value for the asset need to be revised and adjusted in accordance with the Technical Pronouncements applicable to the asset, even if no impairment loss is recognized for the asset.

Measurement of recoverable amount

This Pronouncement defines recoverable amount as the higher value between the fair value less costs of sale of an asset or cash-generating unit and its value in use. Items 19 to 57 establish the requirements for the measurement of recoverable amount. These requirements use the term “an asset”, although they apply equally to an individual asset or to a cash-generating unit.
It is not always necessary to determine the fair value less costs of sale of an asset and its value in use. If either of these amounts exceeds the carrying amount of the asset, it is not impaired and, therefore, it is not necessary to estimate the other value.
It is possible to measure the fair value less costs of disposal, even if there is no quoted price in an active market for an identical asset. However, sometimes it is not possible to measure the fair value less costs of disposal because there is no basis to make a reliable estimate of the price at which an orderly transaction for the sale of the asset would occur between market participants on the measurement date under current market conditions. In this case, the value in use may be used as its recoverable amount.
If there is no reason to believe that the value in use of an asset exceeds materially its fair value less costs of sale, the fair value less costs of sale of the asset may be considered as its recoverable amount. This will often be the case for an asset that is held for disposal. This occurs because the value in use of an asset held for disposal will correspond mainly to the net proceeds from disposal, since the future cash flows from the continued use of the asset, until its disposal, will probably be negligible.

CVM RESOLUTION NO. 90, OF MAY 20, 2022

The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows from its continued use, which are, to a large extent, independent of those arising from other assets or groups of assets. If this is the case, the recoverable amount is determined for the cash-generating unit to which the asset belongs (see items 65 to 103), unless:
(a) the fair value less costs of sale of the asset is greater than its carrying amount; or (b) the value in use of the asset can be estimated as being close to the fair value less costs of disposal and this can be measured.
In some cases, estimates, averages and synthetic calculations may offer a reasonable approximation of the detailed calculations demonstrated in this Pronouncement to determine the fair value less costs of sale or the value in use.

Measurement of recoverable amount of intangible asset with indefinite useful life

Item 10 requires that an intangible asset with indefinite useful life be tested at least annually with respect to the reduction in recoverable amount, comparing its carrying amount with its recoverable amount, regardless of whether there is, or not, any indication that there may be a reduction in recoverable amount. However, the most recent detailed calculation of the recoverable amount of such an asset, carried out in a previous period, may be used in the recoverable amount test for this asset in the current period, provided that all the following criteria are met:
(a) if the intangible asset does not generate cash inflows from its continued use, which are, to a large extent, independent of those arising from other assets or group of assets, being the asset, therefore, tested for recoverable amount purposes as part of the cash-generating unit to which it belongs, and the assets and liabilities that make up this unit have not undergone significant changes since the most recent calculation of the recoverable amount; (b) the most recent calculation of the recoverable amount resulted in a value that exceeds the carrying amount of the asset with a substantial margin; and (c) based on analysis of events that occurred and circumstances that have changed since the most recent calculation of the recoverable amount, it is remote that the determination of the current recoverable amount is less than the carrying amount of the asset.

Fair value less cost of sale

25 to 27. (Eliminated)

Costs of disposal, except those already recognized as a liability, must be deducted when measuring the fair value less costs of disposal. Examples of these types of expenses are legal expenses, taxes, expenses with the removal of the asset and direct incremental expenses to leave the asset in condition for sale. However, expenses with dismissal of employees and those associated with the reduction or reorganization of a business following the disposal of an asset are not incremental expenses for disposal of the asset.
At some point, the disposal of an asset could require the buyer to assume a liability and only a single fair value less costs of sale, encompassing the asset and the liability imputed to the buyer, would be available. Item 78 explains how to treat these situations.

Value in use

The following elements must be reflected in the calculation of the value in use of the asset:
(a) estimate of the future cash flows that the entity expects to obtain with this asset; (b) expectations regarding possible variations in the amount or timing of occurrence of these future cash flows; (c) time value of money, represented by the current risk-free interest rate; (d) price for the assumption of uncertainty inherent in the asset (premium); and (e) other factors, such as lack of liquidity, that market participants would consider when pricing the expected future cash flows of the entity, arising from the asset.
The estimate of the value in use of an asset involves the following steps:
(a) estimate future cash inflows and outflows derived from the continued use of the asset and its final disposal; and (b) apply the appropriate discount rate to these future cash flows.
The elements identified in items 30(b), (d) and (e) may be reflected as adjustments to future cash flows or as adjustments to the discount rate. Whatever approach the entity adopts to reflect expectations regarding possible variations in the amount or timing of occurrence of future cash flows, the result must reflect the expected present value of the future cash flows, that is, the weighted average of all possible outcomes. Appendix A offers additional guidance regarding the use of present value techniques for the measurement of the value in use of an asset.

Basis for estimates of future cash flows

When measuring the value in use the entity must:
(a) base cash flow projections on reasonable and supportable assumptions that represent management’s best estimate of the range of economic conditions that will exist over the remaining useful life of the asset. Greater weight should be given to external evidence; (b) base cash flow projections on the most recent forecasts or financial budgets approved by management, which, however, must exclude any estimate of cash flow expected to arise from future restructurings or from the improvement or enhancement of the asset's performance. Projections based on these forecasts or budgets should cover, as a general rule, the maximum period of five years, unless a longer period is justified and supported; (c) estimate cash flow projections beyond the period covered by the most recent forecasts or budgets by extrapolating projections based on budgets or forecasts using a stable or decreasing growth rate for subsequent years, unless a growing rate can be duly justified. This growth rate must not exceed the average long-term growth rate for the products, industry sectors or country or countries in which the entity operates or for the market in which the asset is used, unless a higher rate is justified and supported.
Management must evaluate the reasonableness of the assumptions on which current cash flow projections are based, by examining the causes of the differences between past cash flow projections and actual observed cash flows. Management must ensure that the assumptions on which its current cash flow projections are based are consistent with past observed results, ensuring that the effects of subsequent events or circumstances, which were not foreseen when the current observed cash flows were estimated, make this appropriate.
Generally, detailed, explicit and reliable financial budgets and forecasts of future cash flows for periods longer than five years are not available. For this reason, management's estimates of future cash flows must be based on the most recent budgets and forecasts for a maximum period of five years. Management may use cash flow projections based on budgets and financial forecasts for a period longer than five years if it is convinced that these projections are reliable and if it can demonstrate its ability, based on past experience, to make accurate cash flow forecasts for this longer period.
Cash flow projections until the end of the useful life of an asset must be estimated by extrapolating cash flow projections based on budgets and financial forecasts, using a growth rate for subsequent years. This rate must be stable or decreasing, unless an increase in the rate is consistent with objective information about product lifecycle patterns or economic sector. If appropriate, the growth rate must be zero or negative.
When conditions are favorable and attractive, possibly competitors will enter the

CVM RESOLUTION NO. 90, OF MAY 20, 2022

market and restrict growth. Therefore, entities have difficulty in exceeding the average long-term historical growth rate, for example, twenty years, for the products, economic sectors or country or countries in which the entity operates or in the market in which the asset is used.

When using information from budgets and financial forecasts, the entity must consider whether the information reflects reasonable and supportable assumptions, and whether they represent management’s best estimate regarding the range of economic conditions that will exist during the remaining useful life of the asset.

Composition of estimates of future cash flows

Estimates of future cash flows must include:
(a) projections of cash inflows arising from the continued use of the asset; (b) projections of cash outflows that are necessarily incurred to generate the cash inflows arising from the continued use of the asset (including cash outflows to prepare the asset for use) and that can be directly attributed or allocated, on a consistent and reasonable basis, to the asset; and (c) if any, net cash flows to be received (or paid) upon disposal of the asset at the end of its useful life.
Estimates of future cash flows and the discount rate must reflect consistent assumptions about price increases due to inflation (general increase in prices). Therefore, if the discount rate includes the effect of price increases due to inflation, future cash flows must be estimated in nominal terms. If the discount rate excludes the effect of price increases due to inflation, future cash flows must be estimated in real terms (however, they must include increases or future specific price reductions).
Cash outflow projections must include those necessary for the usual use and maintenance of the asset, as well as future indirect costs (overheads) that can be directly attributed to the use of the asset, or allocated to it, on a reasonable and consistent basis.
When the carrying amount of an asset does not yet include all cash outflows to be incurred before it is ready for use or sale, the forecast of future cash outflows must include a forecast of any additional cash outflow expected to be incurred before the asset is ready for use or sale. For example, this is the case of a building under construction or a project in development that has not yet been completed.
To avoid double counting, estimates of future cash flows must not include:
(a) cash inflows arising from assets that generate other cash inflows that are, to a large

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extent, independent of the cash inflows of the asset under review (for example, financial assets such as accounts receivable); and (b) cash outflows that refer to obligations that have already been recognized as liabilities (for example, accounts payable, pension plan liabilities and provisions).

Future cash flows must be estimated for the asset in its current condition. Estimates of future cash flows must not include future expected cash inflows or outflows for which it is expected to arise from:
(a) future restructuring with which the entity is not yet committed; or (b) improvement or enhancement of the asset's performance.
Because future cash flows are estimated for the asset in its current condition, the value in use must not reflect:
(a) future cash outflows or expense reductions (for example, reductions in personnel expenses) or benefits that are expected to arise from future restructuring with which the entity is not yet committed; or (b) future cash outflows that will improve or enhance the performance of the asset or the cash inflows related to which it is expected to arise from these cash outflows.
A restructuring is a program that is planned and controlled by management and significantly changes the scope of the business carried out by an entity or the manner in which the business is conducted. The Technical Pronouncement CPC 25 – Provisions, Contingent Liabilities and Contingent Assets contains guidance, elucidating when the entity is committed to a restructuring.
When the entity becomes committed to a restructuring, some assets may possibly be affected by this restructuring. Once the entity is committed to the restructuring:
(a) its estimate of future cash inflows and outflows, in order to determine the value in use, must reflect the cost savings and other benefits arising from the restructuring (based on the most recent financial forecasts or budgets approved by management); and (b) its estimate of future cash outflows for the restructuring is computed in the restructuring provision in accordance with Technical Pronouncement CPC 25.
Until the entity incurs cash outflows that improve or enhance the performance of the asset, estimates of future cash flows must not include the estimated future cash inflows for which it is expected to arise from the increase in economic benefits associated with

SECURITIES AND EXCHANGES COMMISSION OF BRAZIL
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.cvm.gov.br CVM RESOLUTION NO. 90, OF MAY 20, 2022 Example A bus company provides services, under contract, to a municipality that requires a minimum level of service on each of the five lines operated. The assets allocated to each line and the cash flows arising from each line can be identified separately. One of the lines operates at a significant loss. Since the entity does not have the option to eliminate any of the operated lines, the lowest level of identifiable cash inflows that are substantially independent of cash inflows arising from other assets or groups of assets are the cash inflows generated by the five lines together. The cash-generating unit for each line is the bus company as a whole.
69. Cash inflows are cash and cash equivalents received from third parties independent of the entity. In identifying whether cash inflows arising from an asset (or group of assets) are largely independent of cash inflows arising from other assets (or groups of assets), the entity must consider various factors, including the manner in which the management monitors the entity's operations (such as: by product lines, business lines, individual locations, district or regional areas) or the manner in which management makes decisions regarding the continuation or disposal of the entity's assets and operations.
70. If there is an active market for the product generated by an asset or group of assets, that asset or group of assets must be identified as a cash-generating unit, even if some or all of the products are used internally. If the cash inflows generated by any asset or cash-generating unit are affected by internal transfer prices, the entity must use management's best estimate of the future prices that could be obtained in a transaction between independent parties, taking into account:
(a) future cash inflows used to determine the value in use of the asset or cash-generating unit; and (b) future cash outflows used to determine the value in use of any other assets or cash-generating units that are affected by the internal transfer price.
71. Even if part or all of the production of an asset or group of assets is used by other units of the entity (for example, products in an intermediate stage of the production process), that asset or group of assets forms a separate cash-generating unit if the entity can sell the production of that asset in an active market. This happens because this asset or group of assets could generate cash inflows that would be largely independent of cash inflows arising from other assets or groups of assets. When using information based on budgets and financial forecasts that are related to this cash-generating unit, or to any other asset or cash-generating unit affected by the internal transfer price, the entity must adjust this information if the internal transfer prices do not reflect management's best estimate of the prices that would be achieved in a transaction between independent parties, without favor and within the relationship of commutativity.
72. Cash-generating units must be identified consistently from period to period for the same asset or types of assets, unless there is justification for a change.
73. If the entity determines that an asset belongs to a different cash-generating unit than it belonged to in previous periods, or that the types of assets grouped in the cash-generating unit have changed, item 130 requires disclosures regarding the cash-generating unit if an impairment loss is recognized or reversed for this cash-generating unit.
Recoverable amount and carrying amount of a cash-generating unit
74. The recoverable amount of a cash-generating unit is the higher value between fair value less costs of disposal and value in use. For the purpose of determining the recoverable amount of a cash-generating unit, any reference to "an asset" in items 19 to 57 must be read as a reference to "a cash-generating unit".
75. The carrying amount of a cash-generating unit must be determined consistently with the manner in which the recoverable amount of the cash-generating unit is determined.
76. The carrying amount of a cash-generating unit:
(a) must include only the carrying amount of those assets that can be attributed directly or allocated on a reasonable and consistent basis to the cash-generating unit, and that will generate the future cash inflows used to determine the value in use of the cash-generating unit; and (b) must not include the carrying amount of any recognized liability, unless the recoverable amount of the cash-generating unit cannot be determined without considering this liability. This is because the fair value less costs of disposal and the value in use of a cash-generating unit must be determined by excluding cash flows that are related to assets that are not part of the cash-generating unit and liabilities that have been recognized in the financial statements (see items 28 and 43).
77. When assets are aggregated for the purpose of assessing the recoverable amount, it is important to include in the cash-generating unit all assets that generate or are used to generate relevant cash inflows. Otherwise, the cash-generating unit may appear to be fully recoverable when, in fact, an impairment loss has occurred. In some cases, even though some assets contribute to the estimated future cash flows of a cash-generating unit, they cannot be allocated to the cash-generating unit on a reasonable and consistent basis. This could be the case for goodwill or corporate assets, such as head office assets. Items 80 to 102 explain how

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL
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.cvm.gov.br

CVM RESOLUTION NO. 90, OF MAY 20, 2022

reduced by the carrying amount of these liabilities.

Goodwill

Allocation of goodwill to a cash-generating unit

For the purpose of the recoverable amount impairment test, goodwill acquired in a business combination must, from the date of the transaction, be allocated to each of the acquirer's cash-generating units, or to groups of cash-generating units, that are expected to benefit from the synergies of the combination, regardless of whether other assets or liabilities of the acquired entity are, or are not, assigned to those units or groups of units. Each unit or group of units to which goodwill is allocated in this manner must:
(a) represent the lowest level within the entity at which goodwill is monitored for internal management purposes; and (b) not be larger than an operating segment, as defined by item 5 of Technical Pronouncement CPC 22 – Segment Reporting, before aggregation.
Goodwill recognized in a business combination is an asset that represents future economic benefits arising from other assets acquired in the business combination that are not identified individually and are not recognized separately. Goodwill does not generate cash flows independently of other assets or groups of assets, and often contributes to the cash flows of multiple cash-generating units. Sometimes, goodwill cannot be allocated on a non-arbitrary basis to individual cash-generating units, but only to groups of cash-generating units. Thus, the lowest level within the entity at which goodwill is monitored for internal management purposes sometimes includes some cash-generating units to which goodwill relates, but to which it cannot be allocated. The references in items 83 to 99 to a cash-generating unit to which goodwill must be allocated must also be read as references to a group of cash-generating units to which goodwill must be allocated.
The application of the requirements of item 80 results in goodwill being tested for impairment at a level that reflects the manner in which the entity manages its operations and with which goodwill would naturally be associated. Therefore, the development of additional reporting systems is not consequently necessary.
A cash-generating unit to which goodwill is allocated for the purpose of the recoverable amount impairment test may not coincide with the level at which goodwill is allocated according to

CVM RESOLUTION NO. 90, OF MAY 20, 2022

Technical Pronouncement CPC 02 – Effects of Changes in Foreign Exchange Rates and Conversion of Financial Statements for the purpose of measuring gains and losses in foreign currency. For example, if the entity is required by Technical Pronouncement CPC 02 to allocate goodwill to relatively lower levels of cash-generating units for the purpose of measuring foreign currency gains and losses, it is not required for the purpose of the recoverable amount impairment test to use the same level, unless it also monitors goodwill at that level for internal management purposes.

If the initial allocation of goodwill acquired in a business combination cannot be completed before the end of the annual period in which the business combination occurs, this initial allocation must be completed before the end of the first annual period beginning after the acquisition date.
According to Technical Pronouncement CPC 15 – Business Combinations, if the initial accounting treatment of the business combination can only be determined provisionally at the end of the period in which the business combination occurs, the acquirer must:
(a) account for the combination using these provisional values; and (b) recognize any adjustments to these provisional values as a result of the conclusion of the initial accounting treatment within the measurement period, which shall not exceed twelve months from the acquisition date.

Under these circumstances, it may not be possible to conclude the initial allocation of goodwill recognized in a business combination before the end of the annual period in which the combination occurs. When this is the case, the entity must disclose the information required in item 133.

If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the disposed operation must be:
(a) included in the carrying amount of the operation when determining gains or losses on disposal; and (b) measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained in operation (retained), unless the entity can demonstrate that some other method better reflects the goodwill associated with the disposed operation.

CVM RESOLUTION NO. 90, OF MAY 20, 2022

Example
An entity sells for $100 an operation that was part of a cash-generating unit to which goodwill had been allocated.
The goodwill allocated to the unit cannot be identified or associated, except arbitrarily, with a group of assets at a lower level than that unit. The recoverable amount of the remaining portion of the retained cash-generating unit is $300.
Since the goodwill allocated to the cash-generating unit could not be identified or associated, on a non-arbitrary basis, with a group of assets at a lower level than that unit, the goodwill associated with the disposed operation is measured based on the relative values of the disposed operation and the remaining portion of the unit. Therefore, 25% of the goodwill allocated to the cash-generating unit is included in the carrying amount of the operation that is sold.

If the entity reorganizes its reporting structure in a way that alters the composition of one or more cash-generating units to which goodwill has been allocated, goodwill must be reallocated to the affected units. This reallocation must be carried out using a relative value approach similar to that used when the entity disposes of an operation that is part of a cash-generating unit, unless the entity can demonstrate that some other method better reflects the goodwill associated with the reorganized units.

Example
Goodwill was originally allocated to cash-generating unit A. The goodwill allocated to A cannot be identified or associated on a non-arbitrary basis with a group of assets at a lower level than A. Unit A will be split and integrated into three other cash-generating units, B, C, and D.
Since the goodwill allocated to A cannot be identified or associated on a non-arbitrary basis with a group of assets at a lower level than A, it must be allocated proportionally to units B, C, and D, based on the relative values of the three parts of A, before these parts are integrated into B, C, and D.

Testing a cash-generating unit with goodwill for impairment

When goodwill relates to a cash-generating unit but has not been allocated to it, as described in item 81, that cash-generating unit must be tested for impairment whenever there is indication that the unit may be impaired, by comparing the carrying amount of the unit, excluding any goodwill, with its recoverable amount. Any impairment loss must be recognized in accordance with item 104.
If the cash-generating unit described in item 88 includes in its carrying amount an intangible asset that has an indefinite useful life, or that is not yet available for use, and that asset can only be tested for impairment as part of the cash-generating unit, item 10 requires that the unit also be tested annually for impairment.
The cash-generating unit to which goodwill has been allocated must be tested annually for impairment and whenever there is indication that the unit may be impaired, by comparing its carrying amount, including goodwill, with the recoverable amount of the unit. If the recoverable amount of the unit exceeds its carrying amount, the unit and the goodwill allocated to that unit must be considered as not impaired. If the carrying amount of the unit exceeds its recoverable amount, the entity must recognize an impairment loss in accordance with item 104.

91 to 95. (Eliminated)

Timing of impairment tests

The annual impairment test for a cash-generating unit to which goodwill has been allocated may be performed at any time during the annual period, provided that the test is performed, every year, at the same time. Different cash-generating units may be tested for impairment at different times. However, if part or all of the goodwill allocated to a cash-generating unit arises from a business combination that occurred during the current annual period, that unit must be tested for impairment before the end of the current annual period.
If the assets that constitute the cash-generating unit to which goodwill has been allocated are tested at the same time that such procedure is waived for that unit, they must be tested for impairment before that unit. Similarly, if the cash-generating units constitute a group of cash-generating units to which goodwill has been allocated, and their impairment is tested at the same time as that group of units, the individual units must be tested for impairment before that group of units.

CVM RESOLUTION NO. 90, OF MAY 20, 2022

When performing the impairment test for a cash-generating unit to which goodwill has been allocated, there may be indication of impairment of an asset within that unit. In such circumstances, the entity must first test the asset for impairment and recognize any impairment for that asset, before performing the test on the cash-generating unit containing the goodwill. Similarly, there may be indication of impairment of a cash-generating unit within a group of units containing goodwill. In such circumstances, the entity must first test the impairment of that cash-generating unit and recognize any observed impairment, before testing the impairment of that group of units.
The most recent detailed calculation, made in a prior period, of the recoverable amount of a cash-generating unit to which goodwill has been allocated may be used in the test of that unit in the current period, provided that all the following criteria are met:
(a) the assets and liabilities that make up the unit have not undergone significant changes since the most recent recoverable amount calculation; (b) the most recent recoverable amount calculation resulted in a value that exceeded the carrying amount of a unit by a substantial margin; and (c) based on the analysis of events that have occurred, and circumstances that have changed since the most recent recoverable amount calculation, the probability of the current determination of the recoverable amount of a cash-generating unit being lower than the current carrying amount is remote.

Corporate assets

Corporate assets include the assets of the entity's group, department, or division, such as the entity's headquarters or division building, or data processing equipment or research centers. The entity's structure determines whether an asset meets the definition of this Pronouncement's corporate assets for an individual cash-generating unit. The peculiar characteristics of corporate assets are that they do not generate cash inflows independently of other assets or groups of assets, and that their carrying amount cannot be fully attributed to the cash-generating unit under review.
Because corporate assets do not generate separate cash inflows, the recoverable amount of an individual corporate asset cannot be determined, unless management has decided to dispose of the asset. As a consequence, if there is indication that the corporate asset may have become impaired, the recoverable amount must be determined for the cash-generating unit or group of cash-generating units to which the corporate asset belongs, by comparing it to the carrying amount of that cash-generating unit or group of cash-generating units.

Any impairment loss must be recognized in accordance with item 104.

When testing a cash-generating unit for impairment, the entity must identify all corporate assets that are related to the cash-generating unit under review. If a portion of the carrying amount of the corporate asset:
(a) can be allocated on a reasonable and consistent basis to that unit, the entity must compare the carrying amount of the unit, including the portion of the carrying amount of the corporate asset allocated to that unit, with its recoverable amount. Any impairment loss must be recognized in accordance with item 104. (b) cannot be allocated on a reasonable and consistent basis to that unit, the entity must cumulatively and sequentially:
(i) compare the carrying amount of the unit, excluding the corporate asset, with its recoverable amount and recognize any impairment loss in accordance with item 104; (ii) identify the smallest group of cash-generating units, which includes the cash-generating unit under review, to which a portion of the carrying amount of the corporate asset can be allocated on a reasonable and consistent basis; and (iii) compare the carrying amount of the group of cash-generating units, including the portion of the carrying amount of the corporate asset allocated to that group of units, with the recoverable amount of the group of units. Any impairment loss must be recognized in accordance with item 104.
(Eliminated)

Impairment in a cash-generating unit

An impairment loss must be recognized for a cash-generating unit – the smallest group of cash-generating units to which goodwill or corporate assets have been allocated – if, and only if, the recoverable amount of the unit (group of units) is less than the carrying amount of the unit (group of units). The impairment loss must be allocated to reduce the carrying amount of the assets of the unit (group of units) in the following order:
(a) first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of units); and (b) subsequently, to the other assets of the unit (group of units) proportionally to the carrying amount of each asset of the unit (group of units).

These reductions in carrying amounts must be treated as impairment losses of individual items of assets and recognized in accordance with item 60.

CVM RESOLUTION NO. 90, OF MAY 20, 2022

When allocating the impairment loss in accordance with item 104, the entity must not reduce the carrying amount of an asset below the highest of:
(a) its fair value less costs of disposal (if it can be measured); (b) its value in use (if it can be determined); and (c) zero.

The amount of the impairment loss that would otherwise have been allocated to the asset must be allocated proportionally to the other assets of the unit (group of units).

If it is not practicable to estimate the recoverable amount for each individual asset of a cash-generating unit, this Pronouncement determines an arbitrary allocation of the impairment loss among the assets of that unit, except for goodwill, because all assets of a cash-generating unit operate jointly.
If the recoverable amount of an individual asset cannot be determined (see item 67),
(a) an impairment loss must be recognized for the asset if its carrying amount is greater than the highest of the following values: its fair value less costs of disposal and the results of the allocation procedures described in items 104 and 105; and (b) no impairment loss must be recognized for the asset if the cash-generating unit to which it relates does not suffer an impairment loss. This applies even if the fair value less costs of disposal of the asset is lower than its carrying amount.

Example
A machine suffered physical damage, but is still operating, although not as well as before the physical damage. The fair value less costs of disposal of the machine is lower than its carrying amount. The machine does not generate independent cash inflows. The smallest identifiable group of assets, which includes the machine and that generates cash inflows that are largely independent of the cash inflows of other assets, is the production line to which the machine belongs. The recoverable amount of the production line indicates that the production line as a whole has not been impaired.

Assumption 1: budgets or forecasts approved by management do not demonstrate management's obligation to replace the machine.
The recoverable amount of the machine alone cannot be estimated, because the value in use of the machine:
(a) may be different from its fair value less costs of disposal; and

CVM RESOLUTION NO. 90, OF MAY 20, 2022

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL (CVM) Seven of September 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 – Corporate Financial Center Building, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil - Tel.: (61) 3327-2030/2031 www.cvm.gov.br

CVM RESOLUTION NO. 90, OF MAY 20, 2022

(b) may be determined only for the cash-generating unit to which the machine belongs (the production line).
The production line has not suffered an impairment loss. Therefore, no impairment loss is recognized for the machine. However, the entity may need to reassess the depreciation period or the depreciation method for the machine. A shorter period or a faster depreciation method may be required to reflect the remaining useful life of the machine or the bases on which economic benefits are expected to be enjoyed by the entity.

Premise 2: budgets or forecasts approved by management demonstrate management's commitment to replace the machine and sell it in the near future. Cash flows from the continued use of the machine until its disposal are estimated as negligible.
The value in use of the machine can be estimated as close to its fair value less costs of disposal. Therefore, the recoverable amount of the machine can be determined, and no consideration should be given to the cash-generating unit to which the machine belongs (the production line). Since the fair value less costs of disposal of the machine is lower than its carrying amount, an impairment loss must be recognized for the machine.

After the requirements of paragraphs 104 and 105 have been met, a liability must be recognized for any remaining amount of an impairment loss of a cash-generating unit if, and only if, this is required by other Pronouncements.

Reversal of impairment loss

Paragraphs 110 to 116 set out the requirements for reversing an impairment loss of an asset or a cash-generating unit recognized in prior periods. These requirements use the term “an asset”, but apply equally to an individual asset or a cash-generating unit. Additional requirements for an individual asset are set out in paragraphs 117 to 121, for a cash-generating unit in paragraphs 122 and 123, and for goodwill in paragraphs 124 and 125.
The entity shall assess at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset, except goodwill, may no longer exist or may have decreased. If any such indication exists, the entity shall estimate the recoverable amount of that asset.
In assessing whether there is any indication that an impairment loss recognized in prior periods for an asset, except goodwill, may have decreased or may no longer exist, the entity shall consider, at a minimum, the following indications:

External sources of information
(a) there are observable indications that the value of the asset has increased significantly during the period; (b) significant changes, with a favorable effect on the entity, have occurred during the period, or will occur in the near future, in the technological, market, economic or legal environment in which it operates or in the market to which the asset is dedicated; (c) market interest rates or other market rates of return on investments have decreased during the period, and these decreases have possibly affected the discount rate used in the calculation of the value in use of the asset and increased its recoverable amount materially;

Internal sources of information
(d) significant changes, with a favorable effect on the entity, have occurred during the period, or are expected to occur in the near future, in the extent or in the manner by which the asset is used or is expected to be used. These changes include costs incurred during the period to improve or enhance the performance of the asset or to restructure the operation to which the asset belongs; (e) there is evidence available from internal reports that indicates that the economic performance of the asset is or will be better than expected.

Indications of a potential reduction in the impairment loss described in paragraph 111 mainly mirror the indications of potential impairment loss described in paragraph 12.
If there is an indication that an impairment loss recognized for an asset, except goodwill, may no longer exist or has decreased, this may be evidence that the remaining useful life, the method of depreciation, amortization or depletion or the residual value need to be revised or adjusted in accordance with Pronouncements applicable to the asset, even if no impairment loss is reversed for the asset.
An impairment loss recognized in prior periods for an asset, except goodwill, shall be reversed if, and only if, there has been a change in the estimates used to determine the recoverable amount of the asset since the last impairment loss that was recognized. If this is the case, the carrying amount of the asset shall be increased, with full compliance with the description in paragraph 117, to its recoverable amount. This increase occurs through the reversal of the impairment loss.
The reversal of an impairment loss reflects an increase in the estimated service potential of an asset, either by use or by sale, since the date on which the entity last recognized an impairment loss for the asset. Paragraph 130 requires the entity to identify the change in estimates that causes the increase in the estimated service potential. Examples of changes in estimates include:
(a) change in the basis of the recoverable amount (for example, if the recoverable amount is based on fair value less costs of disposal or on value in use); (b) if the recoverable amount was based on value in use, change in the amount or in the timing of the estimated future cash flows or in the discount rate; or (c) if the recoverable amount was based on fair value less costs of disposal, change in the estimate of the components of fair value less costs of disposal.
The value in use of an asset may become greater than its carrying amount simply because the present value of future cash inflows increases as these inflows become closer to the current date. However, the service potential of the asset has not increased. Therefore, the impairment loss should not be reversed simply because of the passage of time (sometimes recognized by the term “unwinding” of the discount), even if the recoverable amount of the asset becomes greater than its carrying amount.

Reversal of impairment loss for an individual asset

The increase in the carrying amount of an asset, except goodwill, attributable to the reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of depreciation, amortization or depletion), had no impairment loss been recognized for the asset in prior years.
Any increase in the carrying amount of an asset, except goodwill, above its carrying amount that would have been determined (net of depreciation, amortization or depletion), had the impairment loss for the asset not been recognized in prior years, is considered a revaluation. If and in situations where Brazilian legislation permits, the entity shall apply the specific Pronouncements directed at the matter.
The reversal of an impairment loss of an asset, except goodwill, shall be recognized immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Pronouncement. Any reversal of an impairment loss on a revalued asset shall be treated as a revaluation increase in accordance with such Pronouncement.
The reversal of an impairment loss on a revalued asset shall be recognized in other comprehensive income under the heading of revaluation reserve. However, to the extent that an impairment loss for the same revalued asset was previously recognized in profit or loss, the reversal of that impairment shall also be recognized in profit or loss.
After the reversal of an impairment loss is recognized, the depreciation, amortization or depletion expense for the asset shall be adjusted in future periods to allocate the revised carrying amount of the asset less its residual value (if any) on a systematic basis over its remaining useful life.

Reversal of impairment loss for a cash-generating unit

The reversal of an impairment loss for a cash-generating unit shall be allocated to the assets of the unit, except goodwill, proportionally to the carrying amounts of these assets. These increases in carrying amounts shall be treated as reversals of impairment losses of individual assets and recognized in accordance with paragraph 119.
When allocating the reversal of an impairment loss for a cash-generating unit, in accordance with paragraph 122, the carrying amount of an asset shall not be increased above the lower of the following parameters:
(a) its recoverable amount (if this can be determined); and (b) the carrying amount that would have been determined (net of depreciation, amortization or depletion), had the impairment loss not been recognized in prior years.
The amount of the reversal of the impairment loss, which would otherwise be allocated to the asset, shall be allocated proportionally to the other assets of the unit, except for goodwill.

Reversal of impairment loss of goodwill

An impairment loss recognized for goodwill shall not be reversed in a subsequent period.
Technical Pronouncement CPC 04 – Intangible Assets prohibits the recognition of internally generated goodwill. Any increase in the recoverable amount of purchased goodwill in the periods subsequent to the recognition of an impairment loss for this asset is equivalent to the recognition of internally generated goodwill and not the reversal of an impairment loss recognized for purchased goodwill.

Disclosure

The entity shall disclose the following information for each class of assets:
(a) the amount of impairment losses recognized in profit or loss and the line item in the statement of profit or loss in which these impairment losses were included; (b) the amount of reversals of impairment losses recognized in profit or loss and the line item in the statement of profit or loss in which these reversals were included; (c) the amount of impairment losses of revalued assets recognized in other comprehensive income during the period; and (d) the amount of reversals of impairment losses of revalued assets recognized in other comprehensive income during the period.
A class of assets is a grouping of assets of similar nature and use in the entity’s operations.
The information required in paragraph 126 may be presented with other information disclosed for the class of assets. For example, this information may be included in the reconciliation of the carrying amount of property, plant and equipment at the beginning and at the end of the period, as required by Technical Pronouncement CPC 27 – Property, Plant and Equipment.
An entity that reports segment information in accordance with Technical Pronouncement CPC 22 – Segment Reporting shall disclose the following information for each reported segment:
(a) the amount of impairment losses recognized, during the period, in the statement of profit or loss and in the statement of comprehensive income; (b) the amount of reversals of impairment losses recognized, during the period, in the statement of profit or loss and in the statement of comprehensive income.
The entity shall disclose the following information for each impairment loss or reversal recognized during the period for an individual asset, including goodwill, or for a cash-generating unit:
(a) the events and circumstances that led to the recognition or reversal of the impairment loss; (b) the amount of the impairment loss recognized or reversed; (c) for an individual asset:
(i) the nature of the asset; and
(ii) if the entity reports segment information in accordance with Technical Pronouncement CPC 22, the reported segment to which the asset belongs; (d) for a cash-generating unit:
(i) a description of the cash-generating unit (for example, if it is a product line, an industrial plant, a business operating unit, a geographic area, or a reported segment, in accordance with Technical Pronouncement CPC 22); (ii) the amount of the impairment loss recognized or reversed by class of assets and, if the entity reports segment information in accordance with Technical Pronouncement CPC 22, the same information by segment; and (iii) if the aggregate of assets used to identify the cash-generating unit has changed since the previous estimate of its recoverable amount (if any), a description of the current and previous manner of aggregating the assets involved and the reasons justifying the change in the manner by which the cash-generating unit is identified; (e) the recoverable amount of the asset (cash-generating unit) and whether the recoverable amount of the asset (cash-generating unit) is its fair value less costs of disposal or its value in use; (f) if the recoverable amount is fair value less costs of disposal, the entity shall disclose the following information:
(i) the level of the fair value hierarchy (see Technical Pronouncement CPC 46) within which the measurement of the fair value of the asset (cash-generating unit) is classified in its entirety (without taking into account costs of disposal that are observable); (ii) for the measurement of fair value classified in level 2 and level 3 of the fair value hierarchy, the description of the valuation technique used to measure fair value less costs of disposal. If there has been a change in the valuation technique, the entity shall disclose the change made and the reasons for doing so; and (iii) for the measurement of fair value classified in level 2 and level 3 of the fair value hierarchy, each key assumption on which management based its determination of fair value less costs of disposal. Key assumptions are those for which (cash-generating unit) the recoverable amount of the asset is most sensitive. The entity shall also disclose the discount rate used in the current and previous measurement, if fair value less costs of disposal is measured using the present value technique; (g) if the recoverable amount is value in use, the discount rate used in the current estimate and in the previous estimate (if any) of value in use.
The entity shall disclose the following information for impairment losses as a whole and for reversals of impairment losses as a whole, recognized during the period for which no information has been disclosed in accordance with paragraph 130:
(a) the main classes of assets affected by impairment losses and the main classes of assets affected by reversals of impairment losses; and (b) the main events and circumstances that led to the recognition of these impairment losses and reversals of impairment losses.
The entity is encouraged to disclose the assumptions used to determine the recoverable amount of assets (cash-generating units) during the period. However, paragraph 134 requires the entity to disclose information about the estimates used to measure the recoverable amount of a cash-generating unit when goodwill or an intangible asset with an indefinite useful life is included in the carrying amount of the unit.
If a portion of purchased goodwill, arising from a business combination that occurred during the period, has not been allocated to a cash-generating unit (group of units) at the end of the reporting period in accordance with paragraph 84, the unallocated amount of goodwill shall be disclosed together with the reasons why the value remains unallocated.

Estimates used to measure the recoverable amount of a cash-generating unit containing goodwill or intangible asset with indefinite useful life

The entity shall disclose the information required in items (a) to (f) below for each cash-generating unit (group of units) whose carrying amount of goodwill or intangible assets with indefinite useful life, allocated to the unit (group of units), is significant in comparison with the total carrying amount of goodwill or intangible assets with indefinite useful life recognized by the entity:
(a) the carrying amount of goodwill allocated to the unit (group of units); (b) the carrying amount of intangible assets with indefinite useful life allocated to the unit (group of units); (c) the basis on which the recoverable amount of the unit (group of units) has been determined (for example, value in use or fair value less costs of disposal); (d) if the recoverable amount of the unit (group of units) has been based on value in use:
(i) each key assumption on which management has based its cash flow projections for the period covered by the most recent budget or forecast. Key assumptions are those for which the recoverable amount of the unit (group of units) is most sensitive; (ii) description of the approach used by management to determine the value on which

key assumptions are based; whether these values reflect past experience or, if appropriate, are consistent with external information sources, and, if not, how and why these values differ from past experience or external information sources; (iii) the period over which management has projected cash flows, based on approved budgets or forecasts, and, when a period greater than five years is used for the cash-generating unit (group of units), an explanation of why a longer period is justified; (iv) the growth rate used to extrapolate cash flow projections beyond the period covered by the most recent budget or forecast, and the justification for using any growth rate that exceeds the average long-term growth rate for the products, industry segments, or country or countries in which the entity operates, or for the market to which the unit (group of units) is directed; and (v) the discount rate applied to cash flow projections; (e) if the recoverable amount of the unit (group of units) has been based on fair value less costs of disposal, the valuation techniques used to measure fair value less costs of disposal. The entity is not required to provide the disclosures required by CPC 46. If fair value less costs of disposal is not measured using the quoted price for the identical unit (group of units), the entity must disclose the following information:
(i) each key assumption on which management has based the determination of fair value less costs of disposal. Key assumptions are those for which the recoverable amount of the unit (group of units) is most sensitive; (ii) description of the approach used by management to determine the value on which the key assumptions are based; whether these values reflect past experience or, if appropriate, are consistent with external information sources, and, if not, how and why these values differ from past experience or external information sources; (iia) the level of the fair value hierarchy (see CPC 46) in which the fair value measurement falls in its entirety (without taking into account the observability level of disposal costs); (iib) if there has been a change in valuation technique, the change made and the reasons for doing so; If fair value less costs of disposal has been measured using discounted cash flow projections, the entity must disclose the following information:

(iii) the period over which management has projected cash flows; (iv) the growth rate used to extrapolate cash flow projections; (v) the discount rate applied to cash flow projections; (f) if a possible and reasonable change in a key assumption on which management has based its determination of the recoverable amount of the unit (group of units) could result in a carrying amount exceeding its recoverable amount:
(i) the amount by which the recoverable amount of the unit (group of units) exceeds its carrying amount; (ii) the value on which the key assumption is based; and (iii) the new value on which the key assumption must be based, after incorporating any effects derived from this change in other variables used to measure the recoverable amount, in order for the recoverable amount of the unit (group of units) to equal its carrying amount.
135. If some or all of the carrying amounts of goodwill or indefinite-lived intangible assets are allocated to multiple cash-generating units (group of units), and the value then allocated to each unit (group of units) is not significant compared to the total carrying amount of goodwill or indefinite-lived intangible assets, this fact must be disclosed together with the aggregate carrying amount of goodwill or indefinite-lived intangible assets allocated to these units (group of units). Additionally, if the recoverable amounts of any of these units (group of units) are based on the same key assumption, and the aggregate carrying amount of goodwill or indefinite-lived intangible assets allocated to these units is significant compared to the total carrying amount of goodwill or indefinite-lived intangible assets, the entity must disclose this fact together with:
(a) the aggregate carrying amount of goodwill allocated to these units (group of units); (b) the aggregate carrying amount of indefinite-lived intangible assets allocated to these units (group of units); (c) description of the key assumption; (d) description of management's approach to determine the value on which the key assumption is based; whether this value reflects past experience or, if appropriate, is consistent with external information sources and, if not, how and why this value differs from past experience or external information sources; and

(e) if a reasonable and possible change in the key assumption could result in the aggregate carrying amount of the unit (group of units) exceeding its recoverable amount:
(i) the amount by which the aggregate recoverable amount of the unit (group of units) exceeds its aggregate carrying amount; (ii) the value on which the key assumption is based; and (iii) the new value on which the key assumption must be based, after incorporating any effects derived from this change in other variables used to measure the recoverable amount, in order for the aggregate recoverable amount of the unit (group of units) to equal its aggregate carrying amount.
136. The most recent detailed calculation, performed in a prior period, of the recoverable amount of a cash-generating unit (group of units) may, in accordance with items 24 or 99, be considered and used in the impairment test of this unit (group of units) in the current period, provided that specific criteria are met. When this is the case, the information for that unit (group of units) must be incorporated into the disclosures required by items 134 and 135, regarding the procedures used to calculate the recoverable amount.
137 to 140I. (Eliminated)
141. This Pronouncement CPC 01 (R1) replaces Pronouncement CPC 01 issued on September 14, 2007.

APPENDIX A
Use of present value techniques to measure value in use This Appendix is an integral part of the Pronouncement. It provides guidance on the use of present value techniques in the assessment of value in use. Although the guidance uses the term "asset", it also applies to a group of assets that are part of a cash-generating unit. Components of present value assessment A1. The following elements together capture the economic differences between assets:
(a) estimate of future cash flow or, in more complex cases, series of future cash flows that the entity expects to arise from this asset; (b) expectations regarding possible variations in the amount or timing of these cash flows; (c) time value of money, represented by the current risk-free interest rate observed in the market; (d) price required to make face the uncertainty inherent in the asset (premium); and (e) other factors, sometimes unidentifiable, such as lack of liquidity, that market participants would incorporate in pricing the future cash flows that the entity expects to arise from the asset. A2. This Appendix contrasts two approaches to computing present value, which, depending on the situation, may be used to estimate the value in use of an asset. In the "traditional" approach, adjustments for factors (b) to (e) described in item A1 are embedded in the discount rate. In the "expected cash flow" approach, factors (b), (d), and (e) impose adjustments to arrive at risk-adjusted expected cash flows. Whichever approach the entity adopts to reflect expectations regarding possible variations in the amount or timing of future cash flows, the result must reflect the expected present value of future cash flows, i.e., the weighted average of all possible outcomes. General principles A3. The techniques used to estimate future cash flows and interest rates vary from one situation to another, depending on the circumstances surrounding the asset in question. However, the following general principles serve as a guide for any application of present value techniques in the measurement of assets:
(a) interest rates used to discount cash flows must reflect assumptions consistent

with those inherent in the estimated cash flows. Otherwise, the effect of some assumptions will be counted twice or ignored. For example, a discount rate of 12% may be applied to contractual cash flows of a loan receivable. This rate reflects expectations about future default on loans with specific characteristics. The same 12% rate should not be used to discount expected cash flows because these cash flows already reflect assumptions about future default; (b) estimated cash flows and estimated discount rates must be free of bias and factors unrelated to the asset in question. For example, the conscious act of deliberately underestimating net cash flows to apparently improve the future profitability of an asset introduces bias in the measurement; (c) estimated cash flows or estimated discount rates must reflect possible outcomes rather than a single likely, minimum or maximum possible amount. Traditional and expected cash flow approach Traditional approach A4. Traditionally, the adoption for accounting purposes of present value is based on a single set of estimated cash flows and a single discount rate, usually described as a "risk-adjusted rate". In fact, the traditional approach assumes that a single discount rate can incorporate all expectations regarding future cash flows and the appropriate risk premium. Therefore, the traditional approach places more emphasis on the selection of the discount rate. A5. In some cases, such as those where comparable assets can be observed in the market, the traditional approach is relatively easy to apply. For assets with contractual cash flows, it is consistent with the way market participants characterize assets, as in the "12% bond" example. A6. However, the traditional approach may not be appropriate to address some complex measurement problems, such as the measurement of non-financial assets for which there is no market or comparable asset. A proper search for the "risk-adjusted rate" requires the analysis of at least two items – an asset that exists in the market and has an observable interest rate and the asset to be measured. The appropriate discount rate for the measurable cash flows must be inferred from the observable interest rate of this other asset. To make this inference, the characteristics of the cash flows of the other asset must be similar to those of the asset to be measured. Therefore, the appraiser must do the following:
(a) identify the set of cash flows to be discounted; (b) identify another asset in the market that appears to have similar cash flow characteristics; (c) compare the cash flow sets of the two items to ensure they are similar

(for example, are they both sets of contractual cash flows or is one contractual and the other an estimated cash flow?); (d) assess whether there is an element in one item that is not present in the other (for example, does one item have less liquidity than the other?); and (e) assess whether both sets of cash flows will behave (i.e., vary) in a similar manner, in changing economic conditions. Expected cash flow approach A7. The expected cash flow approach is, in some situations, a more effective measurement tool than the traditional approach. To carry out the measurement, the expected cash flow approach uses all expectations about possible cash flows rather than a single most likely cash flow. For example, the cash flow could be $100, $200 or $300 with probabilities of 10%, 60% and 30%, respectively. The expected cash flow is $220. Thus, the expected cash flow approach differs from the traditional approach by focusing on the direct analysis of the cash flows in question and on more explicit assumptions used in measurement. A8. The expected cash flow approach also allows the use of present value techniques when the timing of cash flows is uncertain. For example, the $1,000 cash flow could be received in one, two or three years with probabilities of 10%, 60% and 30%, respectively. The example below shows the computation of the expected present value in this situation. Present value of $1,000 in 1 year at 5% $952.38 Probability 10.00% $95.24 Present value of $1,000 in 2 years at 5.25% $902.73 Probability 60.00% $541.64 Present value of $1,000 in 3 years at 5.50% $851.61 Probability 30.00% $255.48 Expected present value $892.36 A9. The expected present value of $892.36 differs from the traditional notion of best estimate of $902.73 (60% probability). The traditional present value computation applied to the example requires one to decide which of the possible cash flow timing periods should be used and, therefore, would not reflect the probabilities of different periods. This is because the discount rate in the traditional present value computation cannot reflect uncertainties in the timing of occurrence. A10. The use of probabilities is an essential element of the expected cash flow approach. Some question whether assigning probabilities to highly subjective estimates suggests more precision than actually exists. However, the correct application of the traditional approach (as described in item A6) requires the same estimates and subjectivity without the same transparency of computation of the expected cash flow approach. A11. Many estimates developed in current practice already informally incorporate elements of expected cash flows. Furthermore, accountants often face the need to measure an asset using limited information about the probabilities of possible cash flows. For example, an accountant may encounter the following situations:
(a) the estimated figure is somewhere in the range between $50 and $250, but no value in this range is more likely than any other. Based on this limited information, the estimated expected cash flow is $150 [($50 + $250)/2].
(b) the estimated figure is somewhere in the range between $50 and $250 and the most likely value is $100. However, the probabilities associated with each value are unknown. Based on this limited information, the estimated expected cash flow is $133.33 [($50 + $100 + $250)/3].
(c) the estimated value will be $50 (10% probability), $250 (30% probability) or $100 (60% probability). Based on this limited information, the estimated expected cash flow is $140 [($50 × 0.10) + ($250 × 0.30) + ($100 × 0.60)].
In each case, the estimated expected cash flow is likely the best way to offer the best estimate of value in use than the minimum value, the most likely value or the maximum value, when taken in isolation.
A12. The application of the expected cash flow approach is subject to the cost-benefit constraint. In some cases, the entity may have access to extensive data and be able to develop many cash flow scenarios. In other cases, the entity may be able to merely make general considerations about the variability of cash flows without incurring substantial cost. The entity needs to balance the cost of obtaining additional information against the additional reliability that the information will add to the measurement process. A13. Some argue that expected cash flow techniques are not appropriate for the measurement of a single item or an item with a limited number of possible outcomes. They give as an example an asset with two possible outcomes: 90% probability that its cash flow will be $10 and 10% probability that its cash flow will be $1,000. They assert that the expected cash flow in the example is $109 and criticize such a result, as it does not represent any of the amounts that could be paid in the end. A14. Considerations such as those highlighted above reflect an underlying disagreement with the measurement objective. If the measurement objective is the accumulation of costs to be incurred, expected cash flows may not generate a representative and reliable estimate of the

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expected cost. However, this Pronouncement is focused on the assessment of the recoverable amount of an asset. The recoverable amount of the asset, in this example, is unlikely to be $10, despite being the most likely cash flow. This happens because the measurement of $10 does not incorporate the uncertainty of the cash flow in the measurement of the asset. Instead, the uncertain cash flow is presented as if it were certain. No entity would rationally sell an asset with these characteristics for $10.

Discount Rate

A15. Whatever approach the entity adopts to measure the value in use of an asset, the interest rates used to discount cash flows must not reflect risks for which the estimated cash flows have been adjusted. Otherwise, the effects of some assumptions will be counted twice.

A16. When a specific rate for an asset is not directly accessible in the market, the entity uses approximations to estimate the discount rate. The purpose is to estimate, as far as possible, a market valuation:
(a) of the time value of money for periods up to the end of the asset's useful life; and (b) of factors (b), (d), and (e) described in item A1, to the extent that such factors have not caused adjustments in the calculation of the estimated cash flows.

A17. As a starting point to carry out this estimate, the entity may consider the following rates:
(a) the entity's weighted average cost of capital, calculated using techniques such as the capital asset pricing model (CAPM); (b) the entity's incremental borrowing rate; and (c) other market borrowing rates.

A18. However, these rates need to be adjusted:
(a) to reflect how the market would assess the specific risks associated with the estimated cash flows of the asset; and (b) to exclude risks that are not relevant to the estimated cash flows of the asset or for which the estimated cash flows have been adjusted.
Consideration should be given to risks such as country risk, currency risk, and price risk.

A19. The discount rate is independent of the entity's capital structure and the way the entity has financed the acquisition of the asset, because the expected future cash flows arising from the asset do not depend on the way the entity has financed the acquisition of the asset.

A20. Item 55 requires that the discount rate used be the pre-tax rate. Therefore, when the basis used to estimate the discount rate is the post-tax rate, the basis must be adjusted to reflect the pre-tax rate.

A21. Normally, the entity uses a single discount rate to estimate the value in use of an asset. However, the entity must use separate discount rates for different future periods where the value in use is sensitive to differences in risks for different periods or to the term structure of interest rates.

APPENDIX B (Eliminated)
The text of this Appendix was eliminated from IAS 36 – Bound Volume 2010.

APPENDIX C
Testing the recoverable amount of a cash-generating unit with goodwill and non-controlling interests

C1. According to Technical Pronouncement CPC 15 – Business Combinations, the acquirer must measure and recognize goodwill at the acquisition date as the excess of (a) over (b), defined below:
(a) the aggregate of:
(i) the consideration transferred, measured in accordance with Technical Pronouncement CPC 15 – Business Combinations, which generally determines measurement at fair value at the acquisition date; (ii) the amount of any non-controlling interest in the acquiree, measured in accordance with Technical Pronouncement CPC 15 – Business Combinations; and (iii) in a business combination achieved in stages, the acquirer's interest in the acquiree held prior to the combination, measured at fair value at the acquisition date. (b) the net amount, at the acquisition date, of the identifiable assets acquired and identifiable liabilities assumed, measured in accordance with Technical Pronouncement CPC 15 – Business Combinations.

Allocation of goodwill

C2. Item 80 of this Technical Pronouncement requires that goodwill acquired in a business combination be allocated to each of the acquirer's cash-generating units, or groups of cash-generating units, to which it is expected that economic benefits will arise from synergies of the combination, regardless of whether other assets or liabilities of the acquiree are allocated to these units or groups. It is possible that some of these synergies resulting from the business combination are allocated to cash-generating units in which there are no non-controlling interests.

Testing for impairment

C3. The impairment test involves comparing the recoverable amount of a cash-generating unit with its carrying amount.

C4. If the entity measures the non-controlling interest at its proportionate share of the identifiable net assets of a subsidiary at the acquisition date, rather than at fair value, the goodwill attributable to the non-controlling interest is included in the recoverable amount of the related cash-generating unit, but is not recognized in the consolidated financial statements. As a consequence, the entity must increase the carrying amount of goodwill off-balance sheet, so as to reflect the implied goodwill that would be attributable to non-controlling interests, to comprise 100% of the balance (full goodwill). The adjusted carrying amount of goodwill is then compared with the recoverable amount of the unit to determine whether the cash-generating unit has suffered an impairment loss.

Allocating the impairment loss

C5. Item 104 requires that any identified impairment loss be allocated first to the reduction of the carrying amount of goodwill allocated to a cash-generating unit, and then to the other assets of the cash-generating unit on a pro-rata basis according to their respective carrying amounts.

C6. If a subsidiary, or part of it, with non-controlling interests, is entirely a cash-generating unit, the impairment loss must be allocated between controlling and non-controlling interests in the same proportion in which profits or losses are distributed.

C7. If a subsidiary, or part of it, with non-controlling interests, is part of a broader cash-generating unit, the impairment losses of goodwill must be allocated to the parts of the cash-generating unit that have non-controlling interests and to the parts that do not. The impairment losses must be allocated to the parts of the cash-generating unit on the following bases:
(a) to the extent that the impairment loss is related to the goodwill of the cash-generating unit, by the relative carrying amounts of the goodwill of the parts before the impairment loss; and (b) to the extent that the impairment loss is related to identifiable assets of the cash-generating unit, by the relative carrying amounts of the identifiable net assets of the parts before the impairment loss. Any of these impairment losses must be allocated to the assets of the parts of each unit on a pro-rata basis of the respective carrying amount of each asset in the part. In these parts that have non-controlling interests, the impairment loss must be allocated between controlling and non-controlling interests in the same proportion in which profits or losses are distributed.

C8. If an impairment loss, attributable to a non-controlling interest, is related to goodwill that is not recognized in the consolidated financial statements (see item C4), the impairment loss must not be recognized as an impairment loss of goodwill. In these cases, only the impairment loss related to the goodwill that is attributed to the controlling interest must be recognized as an impairment loss of goodwill.

C9. (Eliminated).

Lineage: No known changes