Itaú Unibanco Holding S.A.: Announcement to the Market

Rhea-AI Summary

Itaú Unibanco Holding has disclosed the differences between its financial statements prepared under BRGAAP and IFRS for the period ending September 30, 2020. The adoption of IFRS 9, which replaced IAS 39, significantly affects the recognition and measurement of financial instruments. As of September 30, 2020, total assets under IFRS amounted to R$1,998,284 million, with adjustments totaling R$111,836 million from BRGAAP. Total stockholders' equity under IFRS was reported at R$147,928 million. Detailed financial statements are available on their investor relations website.

Positive

• The adoption of IFRS 9 indicates a forward-looking approach in financial reporting.
• Total stockholders' equity under IFRS increased to R$147,928 million, reflecting robust financial health.

Negative

• Total assets decreased by R$111,836 million from BRGAAP to IFRS, indicating a significant reduction in reported asset values.

SÃO PAULO, Nov. 3, 2020 /PRNewswire/ -- We present below the differences between our financial statements in BRGAAP and in International Financial Reporting Standards – IFRS.

As from January 1^st, 2018, IFRS 9 came into effect, the accounting standard that replaces IAS 39 in the treatment of Financial Instruments. The new standard is structured to encompass the pillars of classification, measurement of financial assets and impairment and was applied retrospectively by Itaú Unibanco Holding.

The complete consolidated financial statements under IFRS from January to September 2020 are available at our website: www.itau.com.br/investor-relations.

Comparison between BRGAAP1 and IFRS
R$ million
Balance Sheet	BRGAAP	Adjustments and Reclassifications 2	IFRS	BRGAAP	Adjustments and Reclassifications 2	IFRS
		Sep/30/2020			Dec/31/2019
Total Assets	2,110,120	(111,836)	1,998,284	1,738,713	(101,232)	1,637,481
Cash, Compulsory Deposits and Financial Assets At Amortized Cost 3 4 6	1,452,126	(22,318)	1,429,808	1,164,753	3,535	1,168,288
(-) Provision for Expected Loss at Amortized Cost5	(50,208)	3,506	(46,702)	(38,888)	2,859	(36,029)
Financial Assets at Fair Value Through Other Comprehensive Income 4	183,882	(90,073)	93,809	166,676	(89,930)	76,746
(-) Expected Loss at Fair Value Through Other Comprehensive Income 5	(3,445)	3,327	(118)	(3,162)	3,076	(86)
Financial Assets at Fair Value Through Profit or Loss 4	396,328	(4,011)	392,317	345,677	(22,748)	322,929
Tax Assets7	79,345	(6,874)	72,471	56,835	(7,875)	48,960
Investments in Associates and Joint Ventures, Goodwill, Fixed Assets, Intangible Assets, Assets Held for Sale and Other Assets	52,092	4,607	56,699	46,822	9,851	56,673
Total Liabilities	1,967,754	(117,398)	1,850,356	1,595,865	(107,849)	1,488,016
Financial Assets at Amortized Cost 3 6	1,594,801	(113,812)	1,480,989	1,265,471	(105,641)	1,159,830
Financial Assets at Fair Value Through Profit or Loss 4	78,569	449	79,018	48,008	21	48,029
Provision for Expected Loss (Loan Commitments and Financial Guarantees) 5	1,030	3,651	4,681	959	3,181	4,140
Provision for Insurance and Pension Plan	215,085	1,253	216,338	217,216	1,118	218,334
Provisions	19,789	(1)	19,788	21,454	-	21,454
Tax Liabilities 7	10,894	(4,251)	6,643	13,870	(5,979)	7,891
Other Liabilities	47,586	(4,687)	42,899	28,887	(549)	28,338
Total Stockholders' Equity	142,367	5,562	147,928	142,848	6,617	149,465
Non-controlling Interests	11,808	295	12,103	10,861	1,679	12,540
Total Controlling Stockholders' Equity 8	130,559	5,267	135,825	131,987	4,938	136,925

 

1BRGAAP represents accounting practices in force in Brazil for financial institutions, according to regulation of the Central Bank of Brazil;
2Resulted from reclassification of assets and liabilities and other effects from the adoption of IFRS;
3Resulted from the elimination of transactions between parent company and exclusive funds (particularly PGBL and VGBL funds), which are consolidated under IFRS;
4Refer to reclassification of financial assets between measurement categories at fair value and amortized cost;
5Application of criterion for calculation of Expected Loss as set forth by IFRS;
6Difference in accounting, particularly from Foreign Exchange Portfolio, which are now be presented as net effect between Assets and Liabilities;
7Difference in accounting, particularly deffered taxes, which are now accounted for as net effect between Assets and Liabilities in each one of the consolidated companies;
8Reconciliation of Controlling Stockholders' Equity is presented in the following table.

Below is the reconciliation of Results to Stockholders' Equity, with the conceptual description of major adjustments.

	R$ million
	Reconciliation	Stockholders Equity *	Result *
		Sep/30/2020	3rd Q/20	2nd Q/20	3rd Q/19	jan-sep/20	jan-sep/19
	BRGAAP - Values Attributable to Controlling Stockholders	130,559	4,492	3,424	5,576	11,317	19,101
	(a)Expected Loss - Loan and Lease Operations and Other Financial Assets	1,854	25	249	(240)	138	(391)
	(b)Adjustment to Fair Value of Financial Assets	(1,059)	(8)	(257)	(108)	(391)	11
	(c)Acquisition of Interest in Porto Seguro Itaú Unibanco Participações S.A.	436	(1)	(1)	(1)	(3)	(3)
	(d)Criteria  for Write-Off of Financial Assets	1,922	(49)	65	(190)	(5)	(253)
	(e)Financial Lease Operations	99	(25)	(32)	(30)	(94)	(111)
	(f) Other adjustments	2,015	298	(1,725)	158	(1,048)	85
	IFRS - Values Attributable to Controlling Stockholders	135,825	4,732	1,723	5,165	9,914	18,439
	IFRS - Values Attributable to Minority Stockholders	12,103	367	(3,626)	340	(3,040)	659
	IFRS - Values Attributable to Controlling Stockholders and Minority Stockholders	147,928	5,099	(1,903)	5,505	6,874	19,098
	* Events net of tax effects

 

Differences between IFRS and BRGAAP Financial Statements
	(a)In the adoption of IFRS 9, there was a change in the calculation model of incurred loss (IAS 39) to expected loss, considering forward-looking information. On BRGAAP, the concept of Expected Loss is used, pursuant to BACEN Resolution No. 2,682/99.9
	(b) Under IFRS, stocks and quotas classified as permanent investments were measured at fair value and its gains and losses were recorded directly in Result. Additionally, there was a change in the model of classification and measurement of financial assets due to the new categories introduced by IFRS 9.
	(c) Under IFRS, the effect of accounting at fair value of the acquisition of interest in Porto Seguro Itaú Unibanco Participações S.A. was recognized.
	(d) Criterion for write-off of financial assets on IFRS considers the recovery expectative.
	(e) Under IFRS (IAS 17) the financial lease operations are recorded as Fixed Assets,  as a contra-entry of Other Financial Liabilities. Under BRGAAP, as from September 30th,  2015, the consideration of these transactions are now recorded in result, in accordance with CMN Resolution No. 3,617/08.
	(f)Other Adjustments is mainly due to the impairment of goodwill and intangible assets of Itaú Corpbanca in the 2nd Q/20 and reversal of the Amortization of Goodwill under BRGAAP.
	9More details in the Complete Financial Statements for January to September, 2020.

For comparison purposes, we present on the table below the Result and Recurring Result in IFRS and BRGAAP.

R$ million
	Recurring Result	3rd Q/20			3rd Q/19
		BRGAAP	IFRS	Variation	BRGAAP	IFRS	Variation
	Result - Attributable to Controlling Stockholders	4,492	4,732	240	5,576	5,165	(411)
	Exclusion of the Non-Recurring Events	(539)	(363)	176	(1,580)	(1,431)	149
	Mark to market of collateralized securities	(346)	(346)	-	-	-	-
	Goodwill amortization	(169)	-	169	(149)	-	149
	Voluntary severance program	-	-	-	(1,431)	(1,431)	-
	Other	(24)	(17)	7	-	-	-
	Recurring Result - Attributable to Controlling Stockholders	5,030	5,095	65	7,156	6,596	(560)

The tables in this report show the figures in million. Variations and summations, however, were calculated in units.

Alexsandro Broedel
Group Executive Finance Director and Head of Investor Relations

Itaú Unibanco – Corporate Communication
(11) 5019-8880 / 8881 – imprensa@itau-unibanco.com.br

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SOURCE Itaú Unibanco Holding S.A.

FAQ

What are the key differences between BRGAAP and IFRS for Itaú Unibanco in 2020?

The key differences include adjustments totaling R$111,836 million, leading to total assets of R$1,998,284 million under IFRS.

How did the adoption of IFRS 9 affect Itaú Unibanco's financial reporting?

IFRS 9 changed the accounting treatment of financial instruments, focusing on expected loss instead of incurred loss, impacting asset evaluation.

What is Itaú Unibanco's total stockholders' equity under IFRS as of September 30, 2020?

As of September 30, 2020, total stockholders' equity under IFRS was reported at R$147,928 million.

What were Itaú Unibanco's total assets under IFRS as of September 30, 2020?

Total assets under IFRS amounted to R$1,998,284 million as of September 30, 2020.