CVM Resolution No. 92 of May 20, 2022 — CVM — BR

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL - CVM Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – ZIP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – ZIP: 01333-010 – Brazil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br

CVM RESOLUTION NO. 92, OF MAY 20, 2022
Approves the Consolidation of Technical Pronouncement CPC 03(R2) of the Accounting Pronouncements Committee – CPC, which deals with the statement of cash flows.

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 is made mandatory for publicly-held companies to adopt Technical Pronouncement CPC 03(R2), which deals with the statement of cash flows, issued by the Accounting Pronouncements Committee – CPC, as consolidated in Annex “A” to this Resolution.

Art. 2. CVM Deliberation No. 641, of October 7, 2010, is hereby revoked, from the effective date of this Resolution.

Art. 3. This Resolution enters into force on July 1, 2022.

Electronically signed by
Marcelo Barbosa
President

CVM RESOLUTION NO. 92, OF MAY 20, 2022
ANNEX “A”
ACCOUNTING PRONOUNCEMENTS COMMITTEE
TECHNICAL PRONOUNCEMENT CPC 03 (R2)
STATEMENT OF CASH FLOWS
Correlated to International Accounting Standards – IAS 7 (IASB – BV2010)

Summary Item
OBJECTIVE
SCOPE 1 – 3
BENEFITS OF CASH FLOW INFORMATION 4 – 5
DEFINITIONS 6 – 9
Cash and cash equivalents 7 – 9
PRESENTATION OF THE STATEMENT OF CASH FLOWS 10 – 17 Operating activities 13 – 15 Investing activities 16 Financing activities 17 PRESENTATION OF CASH FLOWS FROM OPERATING ACTIVITIES 18 – 20A PRESENTATION OF CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES 21 PRESENTATION OF CASH FLOWS ON A NET BASIS 22 – 24 CASH FLOWS IN FOREIGN CURRENCY 25 – 30 INTEREST AND DIVIDENDS 31 – 34A INCOME TAX AND SOCIAL CONTRIBUTION ON NET INCOME 35 – 36 INVESTMENT IN SUBSIDIARIES, AFFILIATES AND JOINTLY CONTROLLED ENTITIES 37 – 38 CHANGE IN INTEREST IN SUBSIDIARIES AND OTHER BUSINESSES 39 – 42B TRANSACTION THAT DOES NOT INVOLVE CASH OR CASH EQUIVALENTS 43 – 44 CHANGE IN LIABILITY ARISING FROM FINANCING ACTIVITIES 44A – 44E COMPONENTS OF CASH AND CASH EQUIVALENTS 45 – 47

CVM RESOLUTION NO. 92, OF MAY 20, 2022
OTHER DISCLOSURES 48 – 52A
TRANSITIONAL PROVISIONS 53 – 56
REPEAL OF ANOTHER PRONOUNCEMENT 57
ILLUSTRATIVE EXAMPLES
A. Statement of cash flows of an entity that is not a financial institution B. Statement of cash flows for a financial institution

EXPLANATORY NOTE TO THE PRONOUNCEMENT
Objective
Information about the cash flow of an entity is useful in providing users of financial statements with a basis to assess the ability of the entity to generate cash and cash equivalents, as well as the entity’s needs to utilize those cash flows.

The economic decisions that are made by users require assessment of the ability of the entity to generate cash and cash equivalents, as well as the timing of their occurrence and the degree of certainty of their generation.

The objective of this Technical Pronouncement is to require the provision of information about the historical changes in cash and cash equivalents of the entity through a statement of cash flows that classifies the cash flows of the period by operating, investing and financing activities.

Scope

The entity shall prepare a statement of cash flows in accordance with the requirements of this Technical Pronouncement and shall present it as an integral part of its financial statements presented at the end of each period.
(Eliminated)
Users of the financial statements of an entity are interested in knowing how the entity generates and utilizes cash and cash equivalents. This is the case, regardless of the nature of the activities of the entity, even if cash is considered as the product of the entity, as may be the case of a financial institution. Entities need cash essentially for the same reasons, no matter how different their main revenue-generating activities are. They need cash to carry out their operations, pay their obligations and provide a return to their investors. Therefore, this Technical Pronouncement requires all entities to present a statement of cash flows.

Benefits of cash flow information
4. The statement of cash flows, when used in conjunction with the other financial statements, provides information that allows users to assess changes in the entity’s net assets, its financial structure (including its liquidity and solvency) and its ability to change the amounts and timing of cash flows, in order to adapt them to changes in circumstances and opportunities. Information about cash flows is useful in assessing the ability of the entity to generate cash and cash equivalents and enables users to develop models to assess and compare the present value of future cash flows of different entities. The statement of cash flows also contributes to increasing comparability in the presentation of operating performance by different entities, as it reduces the effects arising from the use of different accounting criteria for the same transactions and events.

Historical cash flow information is often used as an indicator of the amount, timing and degree of certainty of future cash flows. It is also useful for verifying the accuracy of past estimates of future cash flows, as well as for examining the relationship between profitability and net cash flows and the impact of price changes.

Definitions
6. The following terms are used in this Technical Pronouncement, with the meanings specified below:
Cash comprises cash on hand and demand deposits.
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash flows are the inflows and outflows of cash and cash equivalents. Operating activities are the principal revenue-producing activities of the entity and other activities that are not investing or financing. Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Financing activities are activities that result in changes in the size and composition

CVM RESOLUTION NO. 92, OF MAY 20, 2022 of the equity and borrowings of the entity.

Cash and cash equivalents
7. Cash equivalents are held to meet short-term cash commitments rather than for investment or other purposes. For an investment to qualify as a cash equivalent, it must be readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value. Therefore, an investment normally qualifies as a cash equivalent only when it has a short maturity, for example, three months or less, from the date of acquisition. Investments in equity instruments (equity instruments) are not included in the concept of cash equivalents, unless they are, substantially, cash equivalents, such as in the case of redeemable preference shares that have a fixed redemption date and whose term meets the definition of short-term.

Bank loans are generally considered as financing activities. However, overdraft balances, resulting from loans obtained through instruments such as special checks or guaranteed current accounts that are settled in a short period of time, are an integral part of the entity’s cash management. In these circumstances, overdraft balances are included as a component of cash and cash equivalents. A characteristic of these arrangements offered by banks is that balances often fluctuate from debtor to creditor.
Cash flows exclude movements between items that constitute cash or cash equivalents because these components are part of the entity’s cash management and not part of its operating, investing and financing activities. Cash management includes the investment of excess cash in cash equivalents.

Presentation of the statement of cash flows
10. The statement of cash flows shall present the cash flows of the period classified by operating, investing and financing activities.

The entity shall present its cash flows arising from operating, investing and financing activities in the manner that is most appropriate to its business. Classification by activity provides information that allows users to assess the impact of such activities on the entity’s financial position and the amount of its cash and cash equivalents. This information can also be used to assess the relationship between these activities.
A single transaction may include cash flows classified in more than one activity. For example, when the cash outflow for loan repayment includes both interest and principal, the interest portion may be classified as an operating activity, but the principal portion must be classified as a financing activity.

Operating activities
13. The amount of cash flows arising from operating activities is a key indicator of the extent to which the entity’s operations have generated sufficient cash flows to repay loans, maintain the entity’s operating capacity, pay dividends and interest on equity and make new investments without recourse to external sources of financing. Information about the specific components of historical operating cash flows is useful, together with other information, in projecting future operating cash flows.

Cash flows arising from operating activities are basically derived from the principal revenue-producing activities of the entity. Therefore, they generally result from transactions and other events that enter into the determination of net income or loss. Examples of cash flows arising from operating activities are:
(a) cash receipts from the sale of goods and the rendering of services; (b) cash receipts arising from royalties, fees, commissions and other revenue; (c) cash payments to suppliers of goods and services; (d) cash payments to employees or on behalf of employees; (e) cash receipts and payments by an insurance company for premiums and claims, annuities and other policy benefits; (f) cash payments or refunds of income taxes, unless they can be specifically identified with financing or investing activities; and (g) cash receipts and payments from contracts held for dealing or trading purposes or available for sale in the near future.

Some transactions, such as the sale of a fixed asset item, may result in a gain or loss, which is included in the determination of net income or loss. The cash flows relating to such transactions are cash flows from investing activities. However, cash payments for the production or acquisition of assets held for rent to third parties that are subsequently sold, as described in item 68A of Technical Pronouncement CPC 27 - Property, Plant and Equipment, are cash flows arising from operating activities. Cash receipts from rents and from the subsequent sale of such assets are also cash flows from operating activities.

The entity may hold securities and loans for immediate or future dealing or trading purposes, which, in that case, are similar to inventories acquired specifically for resale. In this way, cash flows arising from the purchase and sale of these securities are classified as operating activities. Similarly, cash advances and loans made by financial institutions are commonly classified as operating activities, as they refer to the main revenue-generating activity of these entities.

Investing activities

CVM RESOLUTION NO. 92, OF MAY 20, 2022
16. Disclosure separately of cash flows arising from investing activities is important because such cash flows represent the extent to which resource expenditures are made by the entity with the purpose of generating profits and cash flows in the future. Only outflows that result in an asset recognized in the financial statements are eligible for classification as investing activities. Examples of cash flows arising from investing activities are:
(a) cash payments to acquire property, plant and equipment, intangibles and other long-term assets. These payments include those related to capitalized development costs and to property, plant and equipment under construction; (b) cash receipts from the sale of property, plant and equipment, intangibles and other long-term assets; (c) cash payments to acquire equity instruments or debt instruments of other entities and equity interests in joint ventures (except those payments relating to securities considered as cash equivalents or those held for immediate or future dealing or trading); (d) cash receipts from the sale of equity instruments or debt instruments of other entities and equity interests in joint ventures (except those receipts relating to securities considered as cash equivalents and those held for immediate or future dealing or trading); (e) cash advances and loans made to third parties (except those advances and loans made by a financial institution); (f) cash receipts from the settlement of advances or amortization of loans granted to third parties (except those advances and loans of a financial institution); (g) cash payments for futures, forward, option and swap contracts, except when such contracts are held for immediate or future dealing or trading, or the payments are classified as financing activities; and (h) cash receipts from futures, forward, option and swap contracts, except when such contracts are held for immediate or future dealing or trading, or the receipts are classified as financing activities.

When a contract is accounted for as a hedge of an identifiable position, the cash flows of the contract shall be classified in the same way as the cash flows of the position being hedged.

Financing activities
17. Separate disclosure of cash flows arising from financing activities is important as it is useful in predicting future cash flow requirements by providers of capital to the entity. Examples of cash flows arising from financing activities are:
(a) cash received from the issuance of shares or other equity instruments; (b) cash payments to investors to acquire or redeem shares of the entity;

CVM RESOLUTION NO. 92, OF MAY 20, 2022
(c) cash received from the issuance of debentures, loans, promissory notes, other debt securities, mortgages and other short- and long-term loans; (d) repayment of loans and financing; and (e) cash payments by the lessee to reduce the liability relating to a lease. (The expression “leasing” was replaced throughout the pronouncement by “lease” by CPC Revision 14)

Presentation of cash flows from operating activities
18. The entity shall present cash flows from operating activities, using either:
(a) the direct method, under which major classes of gross cash receipts and gross cash payments are disclosed; or (b) the indirect method, under which net income or loss is adjusted by the effects of transactions that do not involve cash, by the effects of any deferrals or accruals of past or future operating cash receipts or payments, and by the effects of items of income or expense associated with cash flows from investing or financing activities.

Under the direct method, information about major classes of gross cash receipts and gross cash payments can be obtained alternatively:
(a) from the entity’s accounting records; or
(b) by adjusting sales, cost of goods sold or services sold (in the case of financial institutions, by interest income and similar and interest expense and similar) and other items from the income statement or comprehensive income statement relating to:
(i) changes occurring in the period in inventories and operating accounts receivable and payable; (ii) other items that do not involve cash; and (iii) other items treated as cash flows arising from investing and financing activities.
Under the indirect method, the net cash flow from operating activities is determined by adjusting net income or loss for the effects of:
(a) changes occurring in the period in inventories and operating accounts receivable and payable; (b) items that do not affect cash, such as depreciation, provisions, deferred taxes, unrealized exchange gains and losses and equity method results when applicable; and (c) all other items treated as cash flows arising from investing and financing activities.

Alternatively, the net cash flow from operating activities may be presented by the indirect method, showing the revenues and expenses disclosed in the income statement or comprehensive income statement and the changes occurring in the period in

CVM RESOLUTION NO. 92, 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. 92, OF MAY 20, 2022

inventories and in accounts receivable and payable.

20A. The reconciliation between net profit and net cash flow from operating activities must be provided, mandatorily, if the entity uses the direct method to determine the net cash flow from operating activities. The reconciliation must present, separately, by category, the main items to be reconciled, similar to what the entity using the indirect method must do regarding adjustments to net profit or loss to determine the net cash flow from operating activities.

Presentation of cash flows from investing and financing activities

The entity must present separately the main classes of gross receipts and gross payments arising from investing and financing activities, except when cash flows, under the conditions described in items 22 and 24, are presented on a net basis.

Presentation of cash flows on a net basis

Cash flows arising from operating, investing, and financing activities may be presented on a net basis in situations where there are:
(a) cash receipts and cash payments on behalf of or in the name of customers, when the cash flows reflect more the activities of the customers than those of the entity itself; and (b) cash receipts and cash payments relating to items that have a quick turnover, significant amounts, and short-term maturities.
Examples of cash receipts and cash payments relating to item 22(a) are:
(a) movements (deposits and withdrawals) in bank checking accounts; (b) resources held for customers by an investment entity; and (c) rents collected on behalf of third parties and paid entirely to the property owners.

23A. Examples of cash receipts and cash payments relating to item 22(b) are advances destined for, and the reimbursement of:
(a) payments and receipts relating to customer credit cards; (b) purchase and sale of investments; and (c) other short-term borrowings, such as those with a maturity of three months or less, counted from their respective contracting.

Cash flows arising from each of the following activities of a financial institution may be presented on a net basis:
(a) cash receipts and cash payments for the acceptance and redemption of fixed-term deposits; (b) deposits made in other financial institutions or received from other financial institutions;

CVM RESOLUTION NO. 92, OF MAY 20, 2022

Cash flows in foreign currency

Cash flows arising from transactions in foreign currency must be recorded in the entity's functional currency by applying, to the amount in foreign currency, the exchange rates between the functional currency and the foreign currency observed on the date the cash flow occurred.
Cash flows of a foreign subsidiary must be converted by applying the exchange rates between the functional currency and the foreign currency observed on the date the cash flows occurred.
Cash flows expressed in foreign currency must be presented in accordance with Technical Pronouncement CPC 02 - Effects of Changes in Exchange Rates and Conversion of Financial Statements. This Technical Pronouncement allows the use of an exchange rate that approximates the prevailing exchange rate. For example, the weighted average exchange rate for a period may be used to record transactions in foreign currency or to convert the cash flows of a foreign subsidiary. However, Technical Pronouncement CPC 02 does not allow the use of the exchange rate at the end of the reporting period when converting the cash flows of a foreign subsidiary.
Unrealized gains and losses resulting from changes in foreign currency exchange rates are not cash flows. However, the effect of changes in exchange rates on cash and cash equivalents, held or owed in foreign currency, is presented in the statement of cash flows, in order to reconcile cash and cash equivalents at the beginning and end of the period. This amount is presented separately from the cash flows from operating, investing, and financing activities and includes differences, if any, if such cash flows had been disclosed at the end-of-period exchange rates.

29 and 30. (Eliminated)

Interest and dividends

Cash flows relating to interest, dividends, and equity dividends received and paid must be presented separately. Each of them must be classified consistently, from period to period, as arising from operating, investing, or financing activities.
The total amount of interest paid during the period is disclosed in the statement of cash flows, whether it has been recognized as an expense in the income statement or capitalized, in accordance with Technical Pronouncement CPC 20 – Borrowing Costs.

CVM RESOLUTION NO. 92, OF MAY 20, 2022

Interest paid and received and dividends and equity dividends received are commonly classified as operating cash flows in financial institutions. However, there is no consensus on the classification of these cash flows for other entities. Interest paid and received and dividends and equity dividends received may be classified as operating cash flows, because they enter into the determination of net profit or loss. Alternatively, interest paid and interest, dividends, and equity dividends received may be classified, respectively, as financing cash flows and investing cash flows, because they are costs of obtaining financial resources or returns on investments.
Dividends and equity dividends paid may be classified as financing cash flows because they are costs of obtaining financial resources. Alternatively, dividends and equity dividends paid may be classified as components of operating cash flows, in order to assist users in determining the entity's ability to pay dividends and equity dividends using operating cash flows.

34A. This Pronouncement strongly encourages entities to classify interest, received or paid, and dividends and equity dividends received as operating cash flows, and dividends and equity dividends paid as financing cash flows. A different alternative must be followed by a note disclosing this fact.

Income tax and social contribution on net profit

Cash flows relating to income tax (IR) and social contribution on net profit (CSLL) must be disclosed separately and must be classified as operating cash flows, unless they can be specifically identified as financing and investing activities.
Taxes on profit (IR and CSLL) result from transactions that generate cash flows that are classified as operating, investing, or financing activities in the statement of cash flows. Although the tax expense may be readily identifiable with investing or financing activities, it is sometimes impracticable to identify the respective tax cash flows, which may also occur in a different period from the cash flows of the underlying transaction. Therefore, taxes paid are commonly classified as operating cash flows. However, when it is practicable to identify the tax cash flow with a specific transaction, from which result cash flows that are classified as investing or financing activities, the tax cash flow must be classified as an investing or financing activity, as appropriate. When tax cash flows are allocated to more than one class of activity, the total amount of taxes paid in the period must also be disclosed.

CVM RESOLUTION NO. 92, OF MAY 20, 2022

Investment in subsidiary, affiliate, and jointly controlled entity

When the accounting criterion for investment in an affiliate, jointly controlled entity, or subsidiary is based on the equity method or the cost method, the investing entity is limited to presenting, in the statement of cash flows, the cash flows between the investing entity itself and the entity in which it has an interest (for example, affiliate, jointly controlled entity, or subsidiary), represented, for example, by dividends and advances.
The entity that presents its interests in an affiliate or jointly controlled entity, using the equity method, must include in its statement of cash flows the cash flows relating to its investments in the affiliate or jointly controlled entity and the profit distributions and other payments or receipts between the entity and the jointly controlled entity.

Change in control of subsidiary and other businesses

The aggregate cash flows arising from the acquisition or loss of control of subsidiaries or other businesses must be presented separately and classified as investing activities.
The entity must disclose, in aggregate, with respect to both the acquisition and the loss of control of subsidiaries or other businesses during the period, each of the following items:
(a) the total amount paid to obtain control or the total amount received in the loss of control; (b) the portion of the total purchase amount paid or sales amount received in cash and cash equivalents; (c) the amount of cash and cash equivalents of subsidiaries or other businesses over which control was obtained or lost; and (d) the amount of assets and liabilities, except cash and cash equivalents, of the subsidiaries and other businesses over which control was obtained or lost, summarized by main classifications.

40A. Investment entity, as defined in Technical Pronouncement CPC 36 – Consolidated Statements, does not need to apply items 40(c) or 40(d) to investment in a subsidiary that is to be measured at fair value through profit or loss.

The separate presentation of the effects of cash flows resulting from the acquisition or loss of control of subsidiaries or other businesses, in specific lines of the statement, together with the separate presentation of the amounts of assets and liabilities acquired or disposed of,

CVM RESOLUTION NO. 92, OF MAY 20, 2022

allows the distinction of these cash flows from cash flows arising from other operating, investing, and financing activities. The effects of cash flows resulting from the loss of control must not be deducted from the effects resulting from the acquisition of control.

The aggregate amount of cash paid or received in consideration for the acquisition or loss of control of subsidiaries or other businesses must be presented in the statement of cash flows, net of the balance of cash or cash equivalents acquired or disposed of as part of these transactions, events, or changes in circumstances.

42A. Cash flows arising from changes in the percentage of interest in a subsidiary, which do not result in the loss of control, must be classified as financing cash flows, unless the subsidiary is held by an investment entity, as defined in Technical Pronouncement CPC 36 – Consolidated Statements, and is to be measured at fair value through profit or loss.

42B. Changes in the percentage of interest in a subsidiary that do not result in the loss of control, such as subsequent purchases or sales of the subsidiary's equity instruments by the parent, must be treated accounting-wise as capital transactions (see Technical Pronouncement CPC 36 – Consolidated Statements), unless the subsidiary is held by an investment entity and is to be measured at fair value through profit or loss. Therefore, the resulting cash flows must be classified in the same way as other transactions between partners or shareholders, as described in item 17.

Transaction that does not involve cash or cash equivalents

Investing and financing transactions that do not involve the use of cash or cash equivalents must be excluded from the statement of cash flows. Such transactions must be disclosed in the notes to the financial statements, so as to provide all relevant information about these investing and financing activities.
Many investing and financing activities do not have a direct impact on current cash flows, although they affect the entity's capital and asset structure. The exclusion of transactions that do not involve cash or cash equivalents from the statement of cash flows is consistent with the objective of said statement, since such items do not involve cash flows in the current period. Examples of transactions that do not involve cash or cash equivalents are:
(a) the acquisition of assets, whether by direct assumption of the respective liability or through leasing; (b) the acquisition of an entity through the issuance of equity instruments; and (c) the conversion of debt into equity instruments.

Change in liability arising from financing activity

CVM RESOLUTION NO. 92, OF MAY 20, 2022

44A. The entity must disclose information that allows users of the financial statements to assess changes in liabilities arising from financing activities, including changes resulting from cash flows and non-cash flows.

44B. To the extent necessary to satisfy the requirement of item 44A, the entity must disclose the following variations of liabilities arising from financing activities:
(a) changes in financing cash flows;
(b) changes resulting from the acquisition or loss of control of subsidiaries or other businesses; (c) effect of changes in exchange rates; (d) changes in fair values; and (e) other changes.

44C. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified in the statement of cash flows as cash flows from financing activities. In addition, the disclosure requirement in item 44A also applies to changes in financial assets (for example, assets that protect against hedging liabilities of financing activities), if the cash flows from these financial assets were, or future cash flows will be, included in the financing cash flow.

44D. One way to comply with the disclosure requirement in item 44A is by providing the reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, including the changes specified in item 44B. When the entity discloses such reconciliation, it must provide sufficient information to allow users of the financial statements to link the items included in the reconciliation of the balance sheet and the statement of cash flows.

44E. If the entity discloses the information required by item 44A, in combination with the disclosure of changes in other assets and liabilities, it must disclose the variations of liabilities arising from financing activities separately from the changes in these other assets and liabilities.

Components of cash and cash equivalents

The entity must disclose the components of cash and cash equivalents and must present a reconciliation of the amounts in its statement of cash flows with the respective items presented in the balance sheet.
Due to the variety of cash management practices and banking products around the world, and with a view to complying with Technical Pronouncement CPC 26 – Presentation of Financial Statements, the entity must disclose the policy it adopts in determining the composition of cash and cash equivalents.

CVM RESOLUTION NO. 92, OF MAY 20, 2022

The effect of any change in the policy to determine the components of cash and cash equivalents, such as the change in the classification of financial instruments previously considered as part of the entity's investment portfolio, must be presented in accordance with Technical Pronouncement CPC 23 – Accounting Policies, Changes in Accounting Estimates and Errors.

Other disclosures

The entity must disclose, accompanied by management's comment, significant balances of cash and cash equivalents held by the entity that are not available for use by the group.
There are several circumstances in which cash and cash equivalents balances held by the entity are not available for use by the group. Among the examples are cash and cash equivalents balances held by a subsidiary that operates in a country where exchange controls or other legal restrictions apply that prevent the widespread use of the balances by the parent or other subsidiaries.
Additional information may be relevant for users to understand the entity's financial position and liquidity. The disclosure of such information, accompanied by management's comment, is encouraged and may include:
(a) the amount of credit lines obtained but not used, which may be available for future operating activities and to satisfy capital commitments, indicating restrictions, if any, on the use of such credit lines; (b) (Eliminated) (c) the aggregate amount of cash flows that represent increases in operating capacity, separately from cash flows that are necessary only to maintain operating capacity; (d) the amount of cash flows arising from operating, investing, and financing activities of each reportable business segment (see Technical Pronouncement CPC 22 – Segment Information); (e) the total amounts of interest and dividends and equity dividends, paid and received, separately, as well as the total amount of income tax and social contribution on net profit paid, in this case highlighting the amounts relating to the taxation of the entity (item 20).
The separate disclosure of cash flows that represent increases in operating capacity and of cash flows that are necessary to maintain operating capacity is useful in allowing the user to determine whether the entity is investing adequately in the maintenance of its operating capacity. An entity that does not invest adequately in the maintenance of its operating capacity may be jeopardizing future profitability in favor of liquidity

The examples show only the current period balances. The corresponding balances of the prior period shall be presented in accordance with Technical Pronouncement CPC 26 – Presentation of Financial Statements.
The information extracted from the income statement and the balance sheet is provided to show how the statement of cash flows was prepared using the direct method and the indirect method. Neither the income statement nor the balance sheet are presented in compliance with the disclosure and presentation requirements of financial statements.
The following additional information is also relevant for the preparation of the statement of cash flows:

All shares of the subsidiary were acquired for $ 590. The fair values of the assets acquired and liabilities assumed were as follows:
Inventory $ 100
Accounts receivable $ 100
Cash $ 40
Fixed assets (land, factories, equipment, etc.) $ 650 Accounts payable $ 100 Long-term debt $ 200
$ 250 were obtained through the issuance of shares and another $ 250 through a long-term loan.
Interest expense was $ 400, of which $ 170 were paid during the period. In addition, $ 100 related to the interest expense of the previous period were paid during the period.
Dividends of $ 1,200 were paid.
The liability for income tax and social contribution on net income, at the beginning and end of the period, was $ 1,000 and $ 400, respectively. During the period, a provision of an additional $ 200 was made. Withholding tax on received dividends was $ 100.
During the period, the group acquired fixed assets (land, factories, and equipment) at a total cost of $ 1,250, of which $ 900 through financial leasing. Cash payments of $ 350 were made for the purchase of fixed assets.

Part of the fixed assets, recorded at a cost of $ 80 and accumulated depreciation of $ 60, was sold for $ 20.
Accounts receivable at the end of 20X2 included interest receivable of $ 100.
Interest of $ 200 and dividends (net of withholding tax of $ 100) of $ 200 were received.
Lease payments of $ 90 were paid during the period.

COMISSÃO DE VALORES MOBILIÁRIOS
Rua Sete de Setembro, 111/2-5º e 23-34º Andares, Centro, Rio de Janeiro/RJ – CEP: 20050-901 – Brasil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2º, 3º e 4º Andares, Bela Vista, São Paulo/ SP – CEP: 01333-010 – Brasil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4º Andar, Brasília/DF – CEP: 70712-900 – Brasil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br RESOLUÇÃO CVM Nº 92, DE 20 DE MAIO DE 2022 (a) This amount could also be presented in the cash flow from operating activities. Statement of Cash Flows by Indirect Method (paragraph 18b) 20X2 Cash flows from operating activities Net income before IR and CSLL 3,350 Adjustments for:
Depreciation 450
Foreign exchange loss 40
Equity in earnings of affiliates (500)
Interest expense 400
3,740
Increase in accounts receivable from customers and others (500) Decrease in inventory 1,050 Decrease in accounts payable – suppliers (1,740) Cash generated from operations 2,550 Interest paid (270) Income tax and social contribution paid (800) Withholding tax on received dividends (100) Net cash generated by operating activities $ 1,380 Cash flows from investing activities Acquisition of subsidiary X, net of cash obtained in acquisition (Note A) (550) Purchase of fixed assets (Note B) (350) Proceeds from sale of equipment 20 Interest received 200 Dividends received 200 Net cash used in investing activities $ (480) Cash flows from financing activities Proceeds from issuance of shares 250 Proceeds from long-term loans 250 Payment of lease liability (90) Dividends paid (a) (1,200) Net cash used in financing activities $ (790) Net increase in cash and cash equivalents $ 110 Cash and cash equivalents at the beginning of the period (Note C) $ 120 Cash and cash equivalents at the end of the period (Note C) $ 230

COMISSÃO DE VALORES MOBILIÁRIOS
Rua Sete de Setembro, 111/2-5º e 23-34º Andares, Centro, Rio de Janeiro/RJ – CEP: 20050-901 – Brasil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2º, 3º e 4º Andares, Bela Vista, São Paulo/ SP – CEP: 01333-010 – Brasil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4º Andar, Brasília/DF – CEP: 70712-900 – Brasil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br RESOLUÇÃO CVM Nº 92, DE 20 DE MAIO DE 2022 Explanatory Notes on the Statement of Cash Flows (Direct and Indirect Methods) A. OBTAINING CONTROL OF AN INVESTEE During the period, the Group obtained control of subsidiary X. The fair values of the assets acquired and liabilities assumed are presented below, in $:
Cash 40
Inventory 100
Accounts receivable 100
Fixed assets 650
Accounts payable – suppliers (100)
Long-term debt (200)
Total purchase price settled in cash 590
Cash acquired from subsidiary X (40)
Cash paid for obtaining control of X net of cash acquired 550 B. FIXED ASSETS During the period, the Group acquired fixed assets at a total cost of $ 1,250, of which $ 900 through financial leasing. Cash payments of $ 350 were made for the acquisition of fixed assets.
C. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash available in the entity, balances held in banks, and short-term financial investments. Cash and cash equivalents included in the statement of cash flows comprise:
20X2 20X1
Cash available and bank balances 40 25
Short-term financial investments 190 135
Cash and cash equivalents as previously presented 230 160 Effect of exchange rate variations - (40) Adjusted cash and cash equivalents $ 230 $ 120 Cash and cash equivalents at the end of the period include bank deposits of $ 100, held by a subsidiary, which are not freely remittable to the controlling holding company due to exchange restrictions. The Group has available credit lines for use in the amount of $ 2,000, of which $ 700 may be used only for future expansion.

The example shows only the current period balances. The comparative balances of the prior period shall be presented, in accordance with Technical Pronouncement CPC 26 – Presentation of Financial Statements.
The example is presented according to the direct method.
20X2
Cash flow from operating activities
Interest and commissions received 28,447
Interest paid (23,463)
Recovery of loans previously written off as loss 237 Payments to employees and suppliers (997) 4,224 (Increase) decrease in operating assets:
Short-term resources (650)
Mandatory deposits 234
Advances to customers (288)
Net increase in credit card receivables (360)
Other short-term negotiable instruments (120)
Increase (decrease) in operating liabilities:
Customer deposits 600
Negotiable certificates of deposit (200)
Net cash from operating activities before IR and CSLL 3,440 Income tax and social contribution paid (100) Net cash from operating activities $ 3,340 Cash flows from investing activities Sale of subsidiary Y 50 Dividends received 200 Interest received 300 Proceeds from sale of securities (non-negotiable securities) 1,200 Purchase of securities (non-negotiable securities) (600) Purchase of fixed assets (500) Net cash from investing activities $ 650 Cash flows from financing activities Issuance of debt instrument 1,000 Issuance of preferred shares by subsidiary 800 Amortization of long-term loan (200) Net reduction in other loans (1,000) Dividends paid (400) Net cash from financing activities $ 200 Effects of exchange rate variations on cash and cash equivalents $ 600 Net increase in cash and cash equivalents $ 4,790 Cash and cash equivalents at the beginning of the period $ 4,050 Cash and cash equivalents at the end of the period $ 8,840

This example illustrates a possible way to provide the disclosures required by paragraphs 44A to 44E.
The example shows only the current period values. The corresponding values of the prior period shall be presented, in accordance with CPC 26 – Presentation of Financial Statements.
20X1 Cash Flow
Non-cash Changes 20X2
Acquisition Exchange
Rate Movement
Change in
Fair Value
Long-term loans
22,000 (1,000) – – – 21,000
Short-term loans
10,000 (500) – 200 – 9,700
Lease liabilities
4,000 (800) 300 – – 3,500
Assets held for protection of long-term loans
(675) 150 – – (25) (550)
Total liabilities from financing activities
35,325 (2,150) 300 200 (25) 33,650

COMISSÃO DE VALORES MOBILIÁRIOS
Rua Sete de Setembro, 111/2-5º e 23-34º Andares, Centro, Rio de Janeiro/RJ – CEP: 20050-901 – Brasil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2º, 3º e 4º Andares, Bela Vista, São Paulo/ SP – CEP: 01333-010 – Brasil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4º Andar, Brasília/DF – CEP: 70712-900 – Brasil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br RESOLUÇÃO CVM Nº 92, DE 20 DE MAIO DE 2022 EXPLANATORY NOTE TO THE PRONOUNCEMENT NE1. This explanatory note accompanies, but is not part of, the Pronouncement. This note is intended to highlight situations where the Pronouncement has certain differences with respect to the International Accounting Standards issued by the IASB and, after that, to comment on them. NE2. Paragraph 18 of the Pronouncement does not give preference to the direct method or the indirect method in the presentation of the Statement of Cash Flows. The IASB mentions, in this paragraph, its preference for the direct method and encourages it. NE3. Paragraph 20A does not exist in the IASB version; thus, this requirement exists in Brazil, but not necessarily in other jurisdictions. NE4. Paragraph 34A does not exist in the IASB version; thus, this requirement exists in Brazil, but not necessarily in other jurisdictions. NE4. Paragraph 50(e) does not exist in the IASB version; thus, this requirement exists in Brazil, but not necessarily in other jurisdictions. NE5. Paragraph 52A does not exist in the IASB version; thus, this requirement exists in Brazil, but not necessarily in other jurisdictions. NE6. The IASB, through its document titled Statement of Best Practice: Working Relationships between the IASB and other Accounting Standard-Setters, admits that jurisdictions may limit the options given by it, as well as that jurisdictions may make additional information requirements beyond those required by it, and declares that this does not prevent the financial statements thus prepared from being declared as being in compliance with the International Accounting Standards issued by it. NE7. Thus, the existence of the differences commented on in paragraphs NE2 to NE5 does not cause the cash flow statements prepared in accordance with this Pronouncement to be non-compliant with IASB standards.

Lineage: No known changes