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Helbor’s financial statements are prepared in accordance with Brazilian GAAP.
Completed units – For completed units, revenue is recognized when the most significant risks and rewards of ownership are transferred, regardless of the receipt of the contractual amount. The fixed rate interest and monetary variation are recognized in the results on the accrual basis, under “finance income”, irrespective of their receipt.
Units Under Construction – For the sales of uncompleted units, the Company adopts the procedures and standards established by CPC 30 – “Revenue” related to the recognition of revenue from the sale of properties with a continuous transfer of the most significant risks and rewards of ownership. The classification of contracts for the sale of ventures for the purposes of the application of this standard is made based on OCPC Guideline 04, which determined the application of Technical Interpretation ICPC 02 to Brazilian real estate development entities. Based on the aforementioned standards of the CPC and taking into consideration the applicable accounting procedures established by Guideline OCPC 01 (R1), the following procedures are adopted for the recognition of revenue from sales of units under construction:
The estimates are revised if circumstances arise that could change the original estimates of revenues, costs or extent of progress toward completion. These revisions may result in increases or decreases in estimated revenues or costs and are reflected in the statement of income in the period in which the circumstances that give rise to the revision become known to management.
Swap Agreements – Swap Agreements for the acquisition of land, with the objective of the delivery of properties to be built, are calculated based on the fair value of the real estate units to be delivered. The fair value of land is recorded as a component of the inventory of land of properties for sale, with a corresponding entry to advances from customers in liabilities, when any conditional clauses of the private instrument or contract related to such transactions have been fulfilled.
The cost of land is then included in the cost of the corresponding real estate development. Advances from customers arising from swap agreements for land are recognized in the results based on the percentage of completion. The unappropriated portion is classified in current liabilities or non-current liabilities, taking into consideration the term estimated for the completion of the development.
Capitalization of Financial Charges – Interest incurred on loans and financing related to the construction of projects should be calculated by finding the difference between the amount in the period and the amount in the previous period and recognized as a property sales cost proportionally to the ideal fraction sold. The standard has already been adopted by the Company.
Selling Expenses – Selling Expenses consist mainly of sales commissions, publicity and advertisement, personnel expenses and the depreciation of sales stands and model units´s decoration.
General & Administrative Expenses – Includes the company´s expenditure related to: services (auditing, legal consultancies, among others), rents, employee remuneration in support areas (not directly related to the construction activities), social contributions, societary expenses (publication of minutes and financial statements) and legal expenses (notary offices, commercial boards).
The income tax and social contribution expenses for the year comprise current and deferred taxes, and both are recorded in the statement of income.
For entities taxed on the actual taxable profit method, income tax and social contribution are calculated at the standard rate of 15%, plus a 10% surtax, for income tax, and at the rate of 9% for social contribution, on taxable profit for the year, adjusted in accordance with criteria established by the prevailing tax legislation.
As permitted by tax legislation, certain subsidiaries, whose revenues in the previous year were lower than R$ 48,000, opted for the deemed profit method. For these companies, the bases of calculation of income tax and social contribution are computed at the rates of 8% and 12%, respectively, on gross revenues (32% when the revenue arises from services rendered and 100% when it arises from financial revenues), to which the standard income tax and social contribution rates are applied.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, bank deposits and other short-term highly liquid investments redeemable within 90 days from the investment date, with an immaterial risk of change in market value. Financial investments included in cash equivalents are mostly classified as “financial assets at fair value through profit or loss”.
Trade receivables refer mainly to sales of units during the real estate development launch and construction phases. In these cases, trade receivables are determined by applying the percentage of completion of the construction (POC) to the revenue from units sold, adjusted according to the terms ofthe sales contracts, thereby determining the amount of accumulated revenue to be recognized, from which the installments received are deducted. If the amount of installments is higher than the recognized accumulated revenue, the balance is recorded in liabilities as advances from customers.
For credit sales of completed units, trade receivables are recognized at the time of sale, regardless of the term of receipt of the contractual amount.
Trade receivables are subject to interest and monetary restatement as from the date a unit is completed, which are allocated, on the accrual basis, to interest income.
Trade receivables are classified as current assets, taking into consideration the amount of all overdue receivables and receivables due within one year. The excess portion is presented as non-current assets.
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method, less a provision for impairment of trade receivables. As regards receivables at December 31, management considers that there is no objective evidence for the recognition of a provision for impairment of trade receivables, because, according to the effectiveagreements, the possession of the property is only transferred to the customer if the contractual obligations are being complied with. Furthermore, in the cases of deliveries of units sold through financing provided by the Company itself, the agreements establish a statutory lien on the corresponding properties.
Properties for Sale
Properties ready to be sold are stated at construction cost, which does not exceed their net realizable value. In the case of properties under construction, the portion in inventory corresponds to the incurred cost of the units not yet sold.
Cost comprises the cost of the acquisition of land, the contracting of construction and other related costs, including the financial cost of the capital invested (finance charges on financing incurred during the construction period and interest on debentures), which are appropriated to the total construction cost and recognized in the results proportionally to the ideal portion of units sold, under “Cost of properties sold”.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated conclusion costs and estimated selling expenses.
Land is stated at acquisition cost, increased by any finance charges generated by the related accounts payable. In the case of swap agreements or units to be constructed, cost corresponds to the fair value, evaluated at the cash sale price of the swapped units.
Deferred Selling Expenses
Property and Equipment
The headquarters of the Company, its branches and subsidiaries are located in properties rented from third parties.
Property and equipment are stated at acquisition cost, less depreciation calculated on the straight-line method, at the rates mentioned in Note 10, which take into consideration the estimated useful lives of the assets. Considering that the Company does not sell its property and equipment items, the residual value of assets is deemed to be zero. The useful economic lives of property and equipment are reviewed, and adjusted if appropriate, at the end of each reporting period.
An item of property and equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on the derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of income, in the period in which the asset is derecognized.
Trade Payables and Payables for Properties
Trade payables are obligations to pay for goods or services that have been acquired from suppliers in the ordinary course of business. Payables for purchases of real estate refer to the purchase of land for real estate development projects. Trade payables and payables for purchases of properties are classified as current liabilities if payment is due in one year or less. If not, they are presented as non-current liabilities.
Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method. In practice, they are usually recognized at the amount of the related invoice/contract plus finance charges incurred and less the related derecognition due to the settlement of the obligations.
Borrowings and Debentures
Borrowings are recognized initially at fair value, net of transaction costs incurred, and are subsequently carried at amortized cost. Any difference between the amounts obtained (net of transaction costs) and the total amount payable is recognized over the period of the borrowings using the effective interest method, as part of the cost of the development (qualifying asset under construction), or in the statement of income.
Borrowings are classified as current liabilities unless the Company and its subsidiaries have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
The debentures are not convertible into shares and are recognized in a similar manner to other borrowings.
According to the norms of the Brazilian Securities Exchange Commission (CVM), the societies in which Helbor possesses a stake in the share capital and managment has been constituted have their financial statements fully consolidated, highlighting their respective minority stakes.