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The Company evaluates expected credit losses in
each reporting period for instruments measured at amortized cost and for debt instruments measured at Fair value through Other comprehensive
income. Losses and reversals of losses are recorded in the income statement.
The interests of financial assets are recorded
on Financial income (expenses), net.
Financial assets: Only derecognized when
contractual rights expire or are effectively transferred.
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Cash and cash equivalents: comprise the balances of cash, banks and securities of immediate liquidity whose maturities,
at the time of acquisition, are equal to or less than 90 days, readily convertible into a known amount of cash and which are subject to
an insignificant risk of change in value. Securities classified in this group, by their very nature, are measured at fair value through
profit or loss.
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Expected credit losses in accounts receivable from customers and other receivables: the Company regularly assesses the historical
losses on the customer portfolios it has in each region, taking in consideration the dynamics of the markets in which it operates and
instruments it has for reducing credit risks, such as: letters of credit, insurance and collateral, as well as identifying specific customers
whose risks are significantly different than the portfolio, which are treated according to individual expectations.
Based on these assessments, estimated loss factors
are generated by portfolio and aging class, which, applied to the amounts of accounts receivable, generate the expected credit losses.
Additionally, the Company evaluates macroeconomic factors that may influence these losses and, if necessary, adjusts the calculation model.
Securities receivable with legal proceedings in
place are reclassified to noncurrent as well as the related estimated credit losses. The securities are written off against the estimated
loss when the Management considers that they are no longer recoverable after taking all appropriate actions to collect them.
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Restricted cash: the Company has restricted cash arising from business combinations to guarantee certain indemnity events.
The classification of cash between current and non-current assets takes place in accordance with the contractual rules for releasing the
amounts to each party.
Financial liabilities: Financial liabilities
are recognized when the entity becomes party to the contractual provisions of the instrument. The initial measurement is at fair value
and subsequently at amortized cost using the effective interest rate method. The interests of financial liabilities are recorded on Financial
income (expenses), net. A financial liability is only derecognized when the contractual obligation expires, is settled or canceled.
Adjustment to present value: The
Company measures the adjustment to present value on short and long-term balances of accounts receivable, suppliers and other obligations,
being recognized as a deduction in the asset accounts against Financial income (expenses), net.
Hedge accounting:
Cash flow hedge: the effective portion
of the gain or loss on the hedge instrument is recognized under Other Comprehensive Income and the ineffective portion in the Financial
result. Accumulated gains and losses are reclassified to the Income statement or statement of financial position when the hedge object
is recognized, adjusting the item in which the hedge object was accounted for.
When the instrument is designated in a cash flow
hedge relationship, changes in the fair value of the future element of the forward contracts and the time value of the options are recognized
under Other Comprehensive Income. When the instrument is settled, these hedge costs are reclassified to the income statement together
with the intrinsic value of the instruments.
A hedging relationship is discontinued prospectively
when it no longer meets the criteria for qualifying as hedge accounting. Upon discontinuation of a cash flow hedge relationship in which
the hedged future cash flows are still expected to occur, the accumulated amount remains under Other Comprehensive Income until the flows
occur and are reclassified to income.
Fair value hedge: the effective portion
of the hedge instrument’s gain or loss is recognized in the Income Statement or statement of financial position, adjusting the item
under which the hedge object is or will be recognized. The hedge object, when designated in this relationship, is also measured at fair
value.
Net investment hedge: the effective
result of the exchange variation of the instrument is recorded under Other Comprehensive Income, in the same item in which the accumulated
translation adjustments of the investments (hedge objects) are recognized. Only when the hedged investments are sold, the accumulated
amount is reclassified to the income statement, adjusting the gain or loss on the sale. |