CMN Resolution No. 4818 — Consolidates General Criteria for Preparation and Disclosure of Individual and Consolidated Financial Statements by Financial Institutions

The Central Bank of Brazil, in accordance with Article 9 of Law No. 4,595 of December 31, 1964, makes public that the National Monetary Council, in a session held on May 29, 2020, based on Articles 4 (items VIII and XII) and 31 of the aforementioned Law, and considering the provisions of Article 61 of Law No. 11,941 of May 27, 2009, and Decree No. 10,139 of November 28, 2019,

R E S O L V E S:

CHAPTER I

OBJECT AND SCOPE OF APPLICATION

Article 1. This Resolution consolidates the general criteria for the preparation and disclosure of individual and consolidated financial statements by financial institutions and other institutions authorized to operate by the Central Bank of Brazil.

Sole Paragraph. The provisions of this Resolution do not apply to consortium administrators and payment institutions, which must observe the regulations issued by the Central Bank of Brazil in the exercise of their legal duties.

CHAPTER II

INDIVIDUAL FINANCIAL STATEMENTS

Section I

Mandatory Financial Statements

Article 2. The institutions mentioned in Article 1 must prepare and disclose the following annual financial statements, relating to the fiscal year, and semi-annual statements, relating to the semesters ended on June 30 and December 31:

I - Balance Sheet;

II - Income Statement;

III - Statement of Comprehensive Income;

IV - Statement of Cash Flows; and

V - Statement of Changes in Equity.

§ 1. The financial statements mentioned in the caput must be disclosed accompanied by their respective explanatory notes.

§ 2. The preparation and disclosure of the financial statements referred to in the caput are mandatory from the date of publication of the authorization to operate in the Official Gazette of the Union.

§ 3. The institutions specified below, which have net equity less than R$2,000,000.00 (two million reais), as of the base date of December 31 of the immediately preceding fiscal year, are exempt from the preparation and disclosure of the Statement of Cash Flows:

I - institutions constituted in the form of closed capital companies;

II - single credit cooperatives; and

III - microentrepreneur and small business credit companies.

§ 4. Semi-annual financial statements relating to the semesters ended on June 30 may be accompanied by selected explanatory notes, in accordance with procedures defined by the Central Bank of Brazil.

Article 3. An institution that has branches abroad must disclose the financial statements mentioned in Article 2 with the consolidated position of operations carried out in the country and abroad.

Article 4. In the preparation and disclosure of financial statements and their respective explanatory notes, the institutions mentioned in Article 1 must observe, in addition to the provisions of this Resolution, the following technical pronouncements of the Accounting Pronouncements Committee (CPC):

I - Technical Pronouncement CPC 03 (R2) – Statement of Cash Flows, approved by the Accounting Pronouncements Committee (CPC) on September 3, 2010;

II - Technical Pronouncement CPC 05 (R1) – Disclosure of Related Parties, approved by the Accounting Pronouncements Committee (CPC) on September 3, 2010;

III - Technical Pronouncement CPC 24 – Subsequent Events, approved by the Accounting Pronouncements Committee (CPC) on July 17, 2009; and

IV - Technical Pronouncement CPC 41 – Earnings per Share, approved by the Accounting Pronouncements Committee (CPC) on July 8, 2010.

§ 1. The technical pronouncements cited in the text of the pronouncements mentioned in the caput cannot be applied until they are also received by a regulation issued by the National Monetary Council or the Central Bank of Brazil.

§ 2. References to other pronouncements in the text of the pronouncements mentioned in the caput must be interpreted as references to CPC pronouncements that have been received by the National Monetary Council or the Central Bank of Brazil, as well as to other regulatory provisions issued by these regulatory authorities.

§ 3. References in the text of CPC 05 (R1) to the terms "control," "joint control," "investment entity," and "significant influence" must be interpreted as references to the following concepts:

I - control: a situation in which the investing institution is exposed to, or has rights to, variable returns arising from its involvement with the investee and has the ability to affect those returns through its power over the investee;

II - joint control: a situation in which there is contractually agreed sharing of control of an entity, in which decisions about activities that significantly affect the returns of the business require the unanimous consent of the controlling parties;

III - investment entity: an entity that cumulatively meets the following conditions:

a) has as its commercial purpose the investment of resources exclusively for the purpose of capital appreciation returns, investment income, or both;

b) obtains resources from investors with the objective of providing them with investment management services; and

c) measures and evaluates the performance of a substantial portion of its investments based on fair value; and

IV - significant influence: the power to participate in decisions on the financial and operating policies of an investee, without controlling or jointly controlling those policies.

§ 4. For the purposes of the provision of item IV of § 3:

I - indications of the existence of significant influence are:

a) representation on the board of directors or executive board of the investee;

b) participation in the policy-making processes, including decisions on dividends and other distributions;

c) material transactions between the investor and the investee;

d) exchange of directors or other senior management members; and

e) provision of essential technical information for the institution's activity; and

II - the existence of significant influence is presumed when the investing institution holds 20% (twenty percent) or more of the voting capital of the investee, without controlling it.

§ 5. Institutions that are not registered as open companies are permitted to observe the provisions of CPC 41.

§ 6. References in the text of CPC 41 to the recognition of preferred shares as liabilities and to other accounting criteria or procedures not provided for in the standards of the National Monetary Council or the Central Bank of Brazil do not authorize institutions to apply these criteria or procedures.

Section II

Interim Financial Statements

Article 5. The institutions mentioned in Article 1 that, voluntarily or by virtue of legal, statutory, or contractual provisions, prepare and disclose interim financial statements must disclose the set of financial statements provided for in Article 2:

I - prepared in accordance with the provisions applicable to semi-annual and annual statements; or

II - prepared in condensed form, including selected explanatory notes, in accordance with procedures defined by the Central Bank of Brazil.

Sole Paragraph. For the purposes of preparation and disclosure of individual financial statements, financial statements relating to periods of less than six months are considered interim.

Article 6. In the preparation of interim financial statements, institutions must apply the same criteria, procedures, practices, and accounting policies applied in semi-annual and annual statements.

Section III

Presentation of Financial Statements

Article 7. The institutions mentioned in Article 1 must, in the preparation and disclosure of the financial statements referred to in this Chapter, appropriately represent the financial and equity position, performance, and cash flows of the institution, in accordance with the definitions and recognition criteria for assets, liabilities, revenues, and expenses provided for in specific regulation.

§ 1. For the purposes of the provision in the caput, the institution must:

I - assume the continuity of its activities in the foreseeable future, unless management intends to liquidate the institution or cease its business, or has no realistic alternative but to discontinue it;

II - present separately each relevant class of similar items, segregating items of different nature or function, unless they are not relevant;

III - observe that assets and liabilities, revenues and expenses:

a) must be recognized under the accrual basis; and

b) cannot be offset, unless required or permitted by specific regulation issued by the National Monetary Council or the Central Bank of Brazil;

IV - disclose comparative information relating to the previous period for all values presented in the current period's financial statements, as well as for narrative and descriptive information that may be presented, if relevant to the understanding of the set of statements;

V - maintain consistency in the presentation and classification of various items in the financial statements from one period to another, unless there is a distinct determination in regulation issued by the National Monetary Council or the Central Bank of Brazil, or if a change in presentation or classification represents reliable and more relevant information for the user; and

VI - present additional information to that required in specific regulation if the requirements established therein are insufficient to allow understanding the impact of certain transactions, events, and conditions on the financial and equity position and performance of the institution.

§ 2. Financial information, including that relating to accounting policies, must be presented in a manner that provides relevant, reliable, comparable, and understandable information.

§ 3. The institution, when observing the provision of item II of § 1, cannot hide information in a way that reduces the clarity and understandability of its financial statements.

§ 4. The accrual basis referred to in item "a" of item III of § 1 does not apply to the Statement of Cash Flows.

Article 8. The institutions mentioned in Article 1 must declare in explanatory notes, explicitly and without reservation, that the financial statements are in compliance with the regulations issued by the National Monetary Council and the Central Bank of Brazil.

CHAPTER III

CONSOLIDATED FINANCIAL STATEMENTS

Article 9. The institutions mentioned in Article 1 registered as open companies or that are leaders of prudential conglomerates classified in Segment 1 (S1), Segment 2 (S2), or Segment 3 (S3), according to specific regulation, must prepare consolidated annual financial statements adopting the international accounting standard according to pronouncements issued by the International Accounting Standards Board (IASB), translated into Portuguese by a Brazilian entity accredited by the International Financial Reporting Standards Foundation (IFRS Foundation).

§ 1. The provision in the caput also applies to:

I - the institution not registered as an open company, leader of a group integrated by an institution registered as an open company; and

II - the institution leader of an economic group that meets the criteria provided for in specific regulation for classification in Segment 1 (S1), Segment 2 (S2), and Segment 3 (S3).

§ 2. It is optional, until January 1, 2022, for the institutions mentioned in the caput and § 1 that, on January 1, 2020, were not obliged to prepare and disclose consolidated financial statements according to the international standard, to prepare and disclose the statements referred to in the caput.

§ 3. In the preparation of the consolidated financial statements referred to in the caput, the effective date of validity of the pronouncements issued by the IASB must be observed.

§ 4. The early adoption of the pronouncements provided for in the caput is conditioned to the provision in regulation of the National Monetary Council.

Article 10. The institutions mentioned in Article 1 that disclose or publish consolidated financial statements, voluntarily or by virtue of legal, regulatory, statutory, or contractual provisions, must adopt the international accounting standard, as provided for in Article 9, in the preparation of these statements.

Sole Paragraph. The provision in the caput also applies to consolidated financial statements relating to periods of less than one year.

Article 11. The institutions mentioned in Article 1 must inform, in explanatory notes to the financial statements referred to in this Chapter, any existing differences between the criteria, procedures, and rules for identification, classification, recognition, and measurement applied in the consolidated statements and those applied in the individual financial statements relating to the same accounting period.

Article 12. The provisions of this Chapter do not apply to credit cooperatives.

CHAPTER IV

DISCLOSURE OF FINANCIAL STATEMENTS

Article 13. Subject to the other legal and regulatory provisions in force, the financial statements referred to in this Resolution must be disclosed in the Financial Statements Center of the National Financial System, at the official electronic address of the Central Bank of Brazil on the internet.

Sole Paragraph. If the institution discloses its financial statements again with alterations, voluntarily or by determination of the Central Bank of Brazil in the exercise of its legal duties, the institution must inform in explanatory notes the facts determining this new disclosure.

Article 14. The financial statements referred to in this Resolution must be disclosed accompanied by the independent audit report, observing specific regulation, and by the administration report on business affairs and the main administrative facts of the period.

Sole Paragraph. In interim financial statements, the disclosure of the administration report is optional.

Article 15. The financial statements referred to in this Resolution must be signed by the administrators and the director responsible for the accounting of the institution and by a legally qualified accountant.

Article 16. The Central Bank of Brazil may, without prejudice to other measures applicable, determine that the institution disclose its financial statements again, with the corrections deemed necessary for the appropriate representation of equity and income items and cash flows.

Sole Paragraph. The institution must make the new disclosure, as provided in the caput, in the same communication channels used for the first disclosure, with the same prominence and with explicit mention in explanatory notes of the facts determining the new disclosure.

CHAPTER V

FINAL PROVISIONS

Article 17. The Central Bank of Brazil is authorized to issue norms and adopt measures deemed necessary for the execution of the provisions of this Resolution, including disposing on:

I - the deadlines for disclosure, the form, content, and method of preparation of financial statements; and

II - the accounting criterion to be observed by institutions in cases where there is more than one option provided for in the accounting standard referred to in Article 9.

Article 18. The institutions mentioned in Article 1 must keep at the disposal of the Central Bank of Brazil, for at least five years, the information, data, consolidation maps, documents, interrogatories, verifications, and questionnaires necessary for the adequate evaluation of active and passive operations and risks assumed by consolidated entities, regardless of their nature or operational activity.

Article 19. The accounting procedures established by this Resolution must be applied prospectively from the date of its entry into force.

Sole Paragraph. The provisions of Articles 10 and 11 shall only take effect from January 1, 2022, and their early application is prohibited, except in the case of voluntary disclosure or publication.

Article 20. The following are repealed:

I - Resolution No. 3,973 of May 26, 2011;

II - Resolution No. 4,636 of February 22, 2018;

III - Resolution No. 4,740 of August 29, 2019;

IV - Articles 1 to 13 of Resolution No. 4,720 of May 30, 2019; and

V - Articles 1 to 9 of Resolution No. 4,776 of January 29, 2020.

Article 21. This Resolution enters into force on January 1, 2021.

Roberto de Oliveira Campos Neto President of the Central Bank of Brazil