Exhibit 99.1

Arco Platform Limited

Consolidated financial statements

December 31, 2022

Arco Platform Limited

Consolidated statements of financial position

As of December 31, 2022 and 2021

(In thousands of Brazilian reais, unless otherwise stated)

	Notes	December 31, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	5		216,360		211,143
Financial investments	6		391,785		973,294
Trade receivables	7		856,887		593,263
Inventories	8		254,060		158,582
Recoverable taxes	9		67,166		38,811
Derivative financial instruments	16		-		301
Related parties	10		3,956		4,571
Other assets			82,515		66,962
Total current assets			1,872,729		2,046,927
Non-current assets
Financial investments	6		30,861		40,762
Derivative financial instruments	16		-		560
Related parties	10		-		6,819
Recoverable taxes	9		11,108		22,216
Deferred income tax	24		337,267		321,223
Other assets			78,038		57,534
Investments and interests in other entities	11		111,631		126,873
Property and equipment	12		59,031		73,885
Right-of-use assets	13		68,696		35,960
Intangible assets	14		3,184,047		3,257,360
Total non-current assets			3,880,679		3,943,192
Total assets			5,753,408		5,990,119

The accompanying notes are part of the consolidated financial statements.

	Notes	December 31, 2022			December 31, 2021
Liabilities
Current liabilities
Trade payables			182,748			103,292
Labor and social obligations	18		89,044			157,601
Lease liabilities	13		34,329			20,122
Loans and financing	15		102,873			228,448
Derivative financial instruments	16		3,693			-
Taxes and contributions payable			9,488			7,953
Income taxes payable			28,576			37,775
Advances from customers			16,079			35,291
Accounts payable to selling shareholders	17		1,060,746			799,553
Other liabilities			6,013			3,176
Total current liabilities			1,533,589			1,393,211
Non-current liabilities
Labor and social obligations	18		1,451			661
Lease liabilities	13		42,576			22,996
Loans and financing	15		1,833,956			1,602,879
Derivative financial instruments	16		110,154			223,561
Provision for legal proceedings	28		3,174			1,398
Accounts payable to selling shareholders	17		330,457			869,233
Other liabilities			621			946
Total non-current liabilities			2,322,389			2,721,674
Total liabilities			3,855,978			4,114,885
Equity	19
Share capital			11			11
Capital reserve			2,009,799			2,203,857
Treasury shares			(8,205	)		(180,775	)
Share-based compensation reserve			95,008			90,813
Accumulated losses			(199,183	)		(238,672	)
Total equity			1,897,430			1,875,234
Total liabilities and equity			5,753,408			5,990,119

The accompanying notes are part of the consolidated financial statements.

Arco Platform Limited

Consolidated statements of income or loss

For the years ended December 31, 2022, 2021 and 2020

(In thousands of Brazilian reais, except earnings per share)

	Notes	December 31, 2022			December 31, 2021			December 31, 2020
Revenue	21		1,775,427			1,232,074			1,001,710
Cost of sales	22		(500,526	)		(294,407	)		(221,130	)
Gross profit			1,274,901			937,667			780,580
Selling expenses	22		(665,014	)		(496,298	)		(372,269	)
General and administrative expenses	22		(338,262	)		(328,643	)		(270,558	)
Other income (expenses), net			23,904			16,673			(2,258	)
Operating profit			295,529			129,399			135,495
Finance income	23		445,237			91,212			45,211
Finance costs	23		(638,483	)		(372,086	)		(142,013	)
Finance result	23		(193,246	)		(280,874	)		(96,802	)
Share of (loss) profit of equity-accounted investees	11		(34,365	)		(22,182	)		409
Profit (loss) before income taxes			67,918			(173,657	)		39,102
Income taxes - income (expense)
Current			(44,473	)		(65,609	)		(87,379	)
Deferred			16,044			81,183			65,057
	24		(28,429	)		15,574			(22,322	)
Net profit (loss) for the year			39,489			(158,083	)		16,780
Profit (loss) for the year attributable to
Equity holders of the parent			39,489			(158,083	)		16,780
Basic earnings (loss) per share - in Brazilian reais	20
Class A			0.71			(3.18	)		0.30
Class B			0.71			(3.18	)		0.30
Diluted earnings (loss) per share - in Brazilian reais	20
Class A			(1.49	)		(3.18	)		0.30
Class B			0.71			(3.18	)		0.30

The accompanying notes are part of the consolidated financial statements.

Arco Platform Limited

Consolidated statements of comprehensive income or loss 

For the years ended December 31, 2022, 2021 and 2020

(In thousands of Brazilian reais)

	Notes	December 31, 2022		December 31, 2021			December 31, 2020
Net profit (loss) for the year			39,489		(158,083	)		16,780
Comprehensive income			-		-			-
			-		-			-
Total comprehensive income or loss for the year			39,489		(158,083	)		16,780

The accompanying notes are part of the consolidated financial statements.

Arco Platform Limited

Consolidated statements of changes in equity

For the years ended December 31, 2022, 2021 and 2020

(In thousands of Brazilian reais, unless otherwise stated)

			Reserves
	Share capital		Capital reserve			Treasury shares			Share-based compensation reserve			Accumulated losses			Total
Balances at December 31, 2019		11		1,607,622			-			84,546			(97,369	)		1,594,810
Net profit for the year		-		-			-			-			16,780			16,780
Issuance of common shares in follow-on public offering		-		591,898			-			-			-			591,898
Share issuance cost		-		(16,291	)		-			-			-			(16,291	)
Restricted stocks transferred		-		17,416			-			(17,416	)		-			-
Share based compensation plan		-		-			-			13,687			-			13,687
Balances at December 31, 2020		11		2,200,645			-			80,817			(80,589	)		2,200,884
Net loss for the year		-		-			-			-			(158,083	)		(158,083	)
Share based compensation plan		-		-			-			33,184			-			33,184
Purchase of treasury shares		-		-			(200,751	)		-			-			(200,751	)
Investment shares transferred		-		16			1,877			(1,893	)		-			-
Restricted stocks transferred		-		3,196			18,099			(21,295	)		-			-
Balances at December 31, 2021		11		2,203,857			(180,775	)		90,813			(238,672	)		1,875,234
Net profit for the year		-		-			-			-			39,489			39,489
Share based compensation plan (Note 19)		-		-			-			35,846			-			35,846
Purchase of treasury shares (Note 19)		-		-			(53,139	)		-			-			(53,139	)
Shares cancelled		-		(106,496	)		106,496			-			-			-
Restricted stocks transferred (Note 19)		-		(87,562	)		119,213			(31,651	)		-			-
Balances at December 31, 2022		11		2,009,799			(8,205	)		95,008			(199,183	)		1,897,430

The accompanying notes are part of the consolidated financial statements.

Arco Platform Limited

Consolidated statements of cash flows

For the years ended December 31, 2022, 2021 and 2020

(In thousands of Brazilian reais, unless otherwise stated)

	Notes	December 31, 2022			December 31, 2021			December 31, 2020
Operating activities
Profit (loss) before income taxes			67,918			(173,657	)		39,102
Adjustments to reconcile profit (loss) before income taxes to cash from operations
Depreciation and amortization	22		277,458			194,885			127,455
Inventory allowances	8 and 22		40,671			26,778			7,453
(Reversal) provision for expected credit losses	9 and 22		(2,247	)		26,610			34,684
Loss on sale/disposal of property and equipment and intangible			430			908			4,277
Fair value change in derivative financial instruments	23		(106,379	)		37,291			(562	)
Fair value adjustment in accounts payable to selling shareholders	23		568			87,820			20,330
Share of loss (profit) of equity-accounted investees	11		34,365			22,182			(409	)
Share-based compensation plan			35,571			70,127			36,333
Accrued interest on loans and financing	15 and 23		247,834			57,245			19,862
Interest accretion on accounts payable to selling shareholders	23		184,218			121,611			68,379
Income from financial investments			(19,461	)		(25,930	)		(13,388	)
Interest on lease liabilities			4,422			4,795			3,036
Provision (reversal) for legal proceedings	28		1,776			(149	)		587
Provision (reversal) for payroll taxes (restricted stock units)			2,024			235			(2,997	)
Foreign exchange effects, net	23		(45,289	)		1,772			(188	)
Changes in fair value of step acquisitions			-			-			307
Gain on changes of interest of investment	11		(17,712	)		(14,022	)		-
Other financial expense (income), net			(3,945	)		(1,276	)		(2,315	)
			702,222			437,225			341,946
Changes in operating assets and liabilities
Trade receivables			(263,364	)		(184,472	)		(108,087	)
Inventories			(122,609	)		(62,212	)		(18,161	)
Recoverable taxes			(16,736	)		(39,199	)		3,152
Other assets			(28,601	)		(62,802	)		(14,087	)
Trade payables			79,456			52,915			3,886
Labor and social obligations			6,062			(6,640	)		7,239
Taxes and contributions payable			1,379			(2,590	)		1,147
Advances from customers			(19,212	)		11,665			(2,981	)
Other liabilities			2,672			(5,724	)		(1,420	)
Cash from operations			341,269			138,166			212,634
Income taxes paid			(53,676	)		(72,564	)		(95,053	)
Interest paid on lease liabilities	13		(3,991	)		(3,294	)		(2,100	)
Interest paid on accounts payable to selling shareholders			(72,930	)		(13,700	)		(187	)
Interest paid on loans and financing	15		(164,536	)		(20,275	)		(13,423	)
Payments for contingent consideration			(70,687	)		(3,837	)		(9,520	)
Payment for stock options - Geekie	1(c)		(75,578	)		-			-
Net cash flows (used in) generated from operating activities			(100,129	)		24,496			92,351
Investing activities
Acquisition of property and equipment	12		(14,322	)		(60,078	)		(10,822	)
Payment of investments and interests in other entities			(32	)		(125,273	)		(32,628	)
Acquisition of subsidiaries, net of cash acquired			-			(795,905	)		(204,286	)
Payments of accounts payable to selling shareholders			(1,270	)		(101,286	)		-
Acquisition of intangible assets	14		(165,846	)		(151,318	)		(96,827	)
Purchase of financial investments			(975,525	)		(2,269,029	)		(1,767,913	)
Redemption of financial investments			1,537,243			1,963,256			1,603,896
Interest received from financial investments			49,153			40,641			33,904
Loans to related parties			(4,811	)		5,000			(5,000	)
Net cash flows (used in) generated from investing activities			424,590			(1,493,992	)		(479,676	)
Financing activities
Capital increase proceeds from public offering			-			-			591,898
Share issuance costs			-			-			(16,291	)
Purchase of treasury shares			(53,139	)		(200,751	)		-
Payment of lease liabilities	13		(21,485	)		(15,729	)		(8,510	)
Payment of accounts payable to selling shareholders			(309,682	)		(193,954	)		(1,733	)
Cash received (payment) for financial derivatives			(2,474	)		185,409			-
Loans and financing issued, net of costs	15		1,188,980			1,578,298			498,434
Loans and financing payments	15		(1,120,024	)		(109,815	)		(301,151	)
Net cash flows (used in) generated from financing activities			(317,824	)		1,243,458			762,647
Foreign exchange effects on cash and cash equivalents			(1,420	)		12,771			188
Increase (decrease) in cash and cash equivalents			5,217			(213,267	)		375,510
Cash and cash equivalents at the beginning of the year	5		211,143			424,410			48,900
Cash and cash equivalents at the end of the year	5		216,360			211,143			424,410
Increase (decrease) in cash and cash equivalents			5,217			(213,267	)		375,510

The accompanying notes are part of the consolidated financial statements.

Notes to the consolidated financial statements

Expressed in thousands of Brazilian reais, unless otherwise stated

1 Corporate information

Arco Platform Limited (“Arco”) is a holding company incorporated under the laws of the Cayman Islands on April 12, 2018, whose shares are publicly traded on the National Association of Securities Dealers Automated Quotations Payments exchange (NASDAQ) under the ticker symbol “ARCE”. Arco and its subsidiaries are collectively referred to as the Company. Arco became the parent company of Arco Educação S.A. ("Arco Brazil") through the completion of a corporate reorganization and initial public offering in 2018. Arco Brazil is the holding company of the operating subsidiaries, including Companhia Brasileira de Educação e Sistemas de Ensino S.A. (“CBE”), which provides educational content from basic to secondary education (“K-12 curriculum”). The Company’s principal administrative office is located at 2840 Rua Augusta, 9th Floor, Consolação, São Paulo, Brazil. OSC Investments Limited is the ultimate parent company of Arco.

Since 2015, the Company has been investing in technology and its printed methodology has evolved to an educational platform capable of delivering the entire K-12 curriculum content. The Company serves private schools in several Brazilian states and cities where it delivers its printed and digital content.

The Company offers a complete pedagogical methodology using technology features to deliver educational content to improve the learning process. The Company’s activities comprise the editing, publishing, advertising and sale of educational content for private schools.

The Company has an asset-light, highly scalable business model that emphasizes operational efficiency and profitability. Arco operates through long-term service contracts with private schools. These contracts generally have terms of validity ranging from one to five years, pursuant to which educational content is provided in printed and digital format to private schools. The revenue is driven by the number of enrolled students at each school using the solutions and the agreed upon price per student per year, all in accordance with the terms and conditions set forth in each contract. As a result, the Company benefits from high visibility in its revenue and operating margin, which is calculated by dividing the operating profit by revenue over a given period.

These consolidated financial statements were approved for issue by the Board of Directors on March 30, 2023.

1.2 Significant events during the year

For the year ended December 31, 2022

(a) Internal restructurings

Corporate restructuring

During the year, the Company completed the following incorporations as part of its corporate reorganization:

● On May 1, 2022, the incorporation of P2D Educação Ltda. by Companhia Brasileira de Educação de Sistemas de Ensino S.A.

● On August 1, 2022, the incorporation of Quadrado Mágico Desenvolvimento e Licenciamento de Software S.A. (Eduqo) and Studos Software Ltda. by Atech Soluções Tecnológicas S.A..

● On October 1, 2022, the incorporation of Geekie Desenvolvimento de Software S.A. by Companhia Brasileira de Educação e Sistemas de Ensino S.A.

The incorporations were part of a tax planning strategy to enable the Company to obtain tax benefits from the amortization of fair value adjustments and goodwill resulting from business combinations.

All incorporated companies were wholly owned subsidiaries of Arco and the incorporated assets and liabilities of the respective companies were recorded at their carrying amounts.

Non-Binding Proposal

On November 30, 2022, the Company’s board of directors received a preliminary non-binding proposal (the “Proposal”) from General Atlantic L.P. (“GA”) and Dragoneer Investment Group, LLC (“Dragoneer”) to acquire all of the outstanding Class A common shares of the Company (the “Proposed Transaction”) that are not held by GA, Dragoneer, Oto Brasil de Sá Cavalcante (“Oto”) or Ari de Sá Cavalcante Neto (“Ari” and together with Oto, the “Founders”), or their respective affiliates.

Pursuant to the terms of the Proposal, the Founders have stated that they support the Proposed Transaction and will agree to roll over 100% of their Class A common shares and Class B common shares. Following the closing of the Proposed Transaction, the Founders will maintain the same economic and voting interests in the Company that they currently own. The purchase price proposed by General Atlantic and Dragoneer for each Class A common share is US$11.00 in cash, which represents a premium of approximately 22% over the closing price of US$9.04 per Class A common share on November 30, 2022.

In January 2023, the Company’s Board of Directors formed a special committee to evaluate the Proposal, as described in Note 30. At this time, it is uncertain that any definitive offer will be made, that any definitive agreement relating to the Proposal or any potential alternative transaction will be executed, or that the Proposed Transaction or any other transaction will be approved or consummated.

Shares repurchases

During the year, the Company purchased an aggregate amount of 551,125 Class A common shares for a total of R$ 53.1 million (equivalent to US$ 10.2 million) as described in Note 19.

(b) Financial transactions

Loan liquidation

On January 3, 2022, the Company paid in full a loan through one of its subsidiaries, Arco Educação, in the amount of R$ 201,883.

Issuance of debentures

In August 2022, the Company issued non-convertible debentures through its subsidiary, Companhia Brasileira de Educação e Sistemas de Ensino S.A. (“CBE”), consisting of 1,200,000 debentures with a unitary value of R$ 1.00, in the total amount of R$ 1,200,000. The net proceeds of R$1,188,980 are intended to pay the debentures issued by CBE in August 2021, currently totaling R$ 1,000,000, to strengthen the Company’s cash position, and to extend the Company’s debt maturity profile. See Note 15 for further information. These transactions were accounted for as a debt extinguishment according to IFRS 9.

(c) Acquisition of interests in other entities and business combinations

Acquisition of additional shares of Geekie

Pursuant to the investment and share purchase agreement (SPA) for the acquisition of Geekie in November 2020, on June 1, 2022, Arco acquired the shares issued to the beneficiaries through the stock option plan, paying the amount of R$ 75,578, corresponding to 12.56% of the total shares, following the conditions previously negotiated in the SPA. At the same date, Arco paid R$ 223,939 to acquire the outstanding non-controlling interest of 37.23%.

Inco Acquisition

On October 6, 2022, the Company announced that it entered into a definitive agreement (the “Purchase Agreement”) to acquire the remaining 75.1% of the share capital of INCO Limited (“Isaac”), the provider of an all-in-one platform that offers a suite of financial and software products to K-12 schools. The purchase price for the transaction will be paid in the form of Arco’s own shares. Prior to the transaction, Arco already held 24.9% of the issued and outstanding equity interests of Isaac. Thus, the transaction will be treated as a step acquisition according to IFRS 3.

This transaction was approved by the Brazilian Administrative Council for Economic Defense (CADE) on November 16, 2022, and the transaction closing occurred in January 2023. Despite the fact that the transaction was approved by the regulatory body (CADE) in 2022, the acquisition date, however, was determined based on the date when Arco fulfilled all the conditions set by the terms in the Equity Purchase Agreement (EPA). As of December 31, 2022 there were several conditions outstanding to consummate the operation. The final closing of the transaction was on January 2, 2023. Therefore, Isaac only became part of the Company in January, not being included in the consolidation as of December 31, 2022.

Fair value of the identifiable assets and liabilities

The Company is evaluating the fair value of identifiable assets and liabilities as of the acquisition date and the purchase price allocation is subject to change during the period of completion of the determination of the fair value of intangible assets according to the deadline defined by IFRS.

Purchase consideration

In consideration for the purchase of the transaction, the Company delivered shares of its common stock to the selling shareholders.

Isaac shareholders received approximately 10.4 million shares of the Company's stock, equivalent to approximately 15.8% of the issued shares and outstanding equity interest, immediately following the closing of the transaction.

Of the 10,436,201 shares delivered to Isaac shareholders, 1,047,142 are treasury shares of the Company, and 9,389,059 are newly issued shares. The transaction resulted in a dilution of approximately 14.2% for the current shareholders of Arco.

The founding shareholders of Isaac are subject to a lock-up period of 3 years from the closing date with respect to their Arco shares, with 1/3 of their shares being released each year.

The Company don’t recognize deferred taxes related to the business combination because the tax basis and the accounting basis, including fair value adjustments, were the same at the date of the business combination.

Goodwill

The goodwill on the acquisition is being evaluated by experts and it is expected to be deductible for tax purposes after the Company incorporates the acquiree and is primarily attributable to the expected synergies and other benefits from combining the assets and activities of Isaac with those of the Company. The goodwill paid is based on the Business Plan prepared for purposes of the acquisition, and the principal business assumptions used were considered by management as appropriate.

For impairment testing purposes, goodwill will be allocated to the appropriate operating segment in accordance with the activities performed by Isaac and is being evaluated by management for proper allocation to existing segments or to a new segment to be defined.

Transaction costs

Transaction costs of R$ 13,159 were expensed and are included in general and administrative expenses as of December 31, 2022.

Payment of the Positivo installment

On November 1, 2022, the Company paid the amount of R$ 198,499 related to the third installment of Positivo acquisition as described in Note 17.c).

Acquisition of additional shares of Me Salva!

As mentioned in Note 4(a), on March 10, 2021, the Company acquired 60% of Me Salva!’s share. On December 9, 2022, Arco signed an addendum to the previous purchase agreement to acquire the 40% outstanding shares of Me Salva!, where it was defined that, on this date, all the remaining shares would be transferred to Arco and that the remaining amount for payment was fixed at R$9,504, to be settled in 3 annual installments, updated by the CDI.

As of December 31, 2022, Arco owns 100% of Me Salva! shares.

(d) Acquisition of intangible assets

Acquisition of PGS and Mentes do Amanhã solutions

On February 3, 2022, Arco concluded the acquisition of the following solutions from Pearson Education do Brasil Ltda.

(i) PGS: a K-12 bilingual courseware and teaching methodology, previously known as Pearson Global School; and (ii) Mentes do Amanhã (“Mentes”): a K-12 supplemental solution focused on 21st century skills (social-emotional learning, financial literacy and technology).

The purchase consideration consisted of: (i) R$ 5,507 paid in February 2022; and (ii) R$ 8,701 paid in May 2022.

The acquired solutions were recorded as intangible assets in accordance with IAS 38 - Intangible Assets.

For the year ended December 31, 2021

(a) Internal restructurings

Change of corporate name of subsidiary

On April 19, 2021, according to a resolution approved by the Board of Directors and registered at the Board of Trade of Ceará, the corporate name of the subsidiary PSD Educação S.A. was changed to Companhia Brasileira de Educação e Sistemas de Ensino S.A.

Corporate restructuring

On January 1,2021 the Company started a corporate reorganization through the incorporation of Arco Ventures S.A. by Companhia Brasileira de Educação e Sistemas de Ensino S.A.

On July 1, 2021, the Company continued the corporate reorganization through the incorporation of Barra Américas Editora Ltda., Distribuidora de Material Didático Desterro Ltda., and SAS Sistema de Ensino Ltda.e SAS Livrarias Ltda. by Companhia Brasileira de Educação e Sistemas de Ensino S.A.

On October 1, 2021, the Company completed the corporate reorganization for the year, through the incorporation of Nave à Vela Ltda. by Companhia Brasileira de Educação e Sistemas de Ensino S.A.

These restructurings seek an operational improvement and generation of income tax savings from the tax deductible amortization of acquired goodwill and identified intangibles arising from the purchase of Positivo.

All incorporated companies were under common control of Arco and the incorporated assets and liabilities of the respective companies were recorded at their carrying amounts. There were no tax effects resulting from the incorporation.

Cancelation of treasury shares

As of November 1, 2021, the Company had repurchased an aggregated amount of 1,172,991 Class A Common Shares under the Repurchase Program previously approved by the Board of Directors. On that date, the Company canceled 750,000 Treasury Shares with the approval of the Board of Directors.

(b) Financial transactions

Issuance of debentures

In August 2021, the Company issued non-convertible debentures through its subsidiary Companhia Brasileira de Educação e Sistemas de Ensino S.A., consisting of 900,000 debentures with a unitary value of R$1.00, in the total amount of R$ 900,000 (with transaction costs in the amount of R$ 8,550). The purpose of this issue is to pay the amount due on the COC and Dom Bosco acquisition. See Note 15 for further information.

Investment from Dragoneer and General Atlantic

On November 30, 2021, Arco signed agreements led by affiliates of Dragoneer Investment Group LLC (“Dragoneer”), which have committed to make a US$100 million strategic investment, and General Atlantic Partners (Bermuda) J, L.P. (“General Atlantic”), which has committed to make a US$50 million strategic investment, through the purchase of convertible senior notes, subject to customary closing conditions. The full amount committed was received by the Company on November 30, 2021. See Note 15 for further information.

Loan agreement

On November 11, 2021, the subsidiary Geekie entered into a loan agreement in the amount of US$ 11,020 thousand with an interest rate of 2.452% p.a. Additionally, Geekie entered into swap contracts with the lender, swapping the original interest rate to CDI + 1.7208%, avoiding any exchange risk. See Note 15 for further information.

(c) Acquisition of interests in other entities and business combinations

Acquisition of additional shares of Geekie

On January 20, 2021, Arco acquired an additional 1.36% interest in Geekie’s share capital through a capital increase of R$4,000, increasing its total interest to 57.42%.

Investment in INCO Limited (“INCO”)

On January 25, 2021, the Company acquired 8,571,427 series B ordinary shares of INCO, a company that provides financial and administrative services to private schools, equivalent to 30.0% of the total capital stock for R$ 25,000.

On April 27, 2021, the Company invested R$ 33,195 in the entity and an additional R$ 53,523 on September 27,2021, in new rounds of investments. See Note 11 for further information.

Acquisition of COC and Dom Bosco learning systems

On March 6, 2021, the Company announced that it entered into a definitive agreement (the “Purchase Agreement”) with Pearson Education do Brasil Ltda. (“Pearson”) to acquire COC and Dom Bosco, two important K-12 learning systems in Brazil.

COC and Dom Bosco have over 50 years of academic track record in Brazil, serving over 800 partner schools and around 210 thousand students in all regions of the country, from pre-K to high school and pre-university. The brands have a strong presence in the Southeast region of Brazil, especially in the state of São Paulo.

Arco expects to accelerate the growth of COC and Dom Bosco by updating their content and technology, improving distribution and customer service capabilities, as well as to cross-sell supplemental solutions within the COC and Dom Bosco partner school base.

This transaction was approved by the Brazilian Administrative Council for Economic Defense (CADE) in September 2021, and the transaction closing date occurred on October 1, 2021 as described in Note 4.

Acquisition of Me Salva!

On March 12, 2021, the Company announced that it had acquired 60% of the outstanding shares of Me Salva!, an entity founded in 2011 with an online educational solution to help students improve their ENEM scores and be admitted to the best universities in the country. The online solutions platform offers recorded and live video classes, comprehensive exercises, essay writing tools, assessment tests, 1-on-1 tutoring and personalized study plans. The remaining 40% will be acquired from the non-controlling interests in 2025 based on the enterprise value (as defined in the sale purchase agreement) of Me Salva! as of December 31, 2024.

This transaction expands Arco’s supplemental solutions portfolio to test prep and tutoring, with an estimated addressable market of R$5 billion and favorable growth prospects. The deal rationale relies on accelerating Me Salva!’s growth by leveraging Arco’s resources and strengthening Arco’s B2B2C winning factors with new digital capabilities. See Note 4 for further information.

Investment in Tera Treinamentos Profissionais Ltda. (“Tera”)

On April 9, 2021, Arco acquired a 23.43% interest in Tera for R$ 15,000 through the purchase of interest from minority shareholders and a capital increase.

Tera provides courses and training for professional and management development and additionally provides consulting services in project development, IT and marketing. See Note 11 for further information.

Acquisition of Quadrado Mágico Desenvolvimento e Licenciamento de Software S.A. (“Eduqo”)

On April 22, 2021, the Company entered into an agreement (the “Purchase Agreement”) to acquire 100% of the outstanding shares of Eduqo, which provides educational services, acting specifically in the Learning Management System (LMS), for R$ 30,000, subject to price adjustments.

This transaction was approved by CADE in June 2021, and the transaction closing date occurred on July 1, 2021. See Notes 4 and 17 for further information.

Acquisition of Desenvoolva – Educação, Treinamento e Consultoria Corporativa Ltda. (“Edupass”)

On September 3, 2021, the Company entered into an agreement (the “Purchase Agreement”) to acquire 100% of the outstanding shares of Edupass, which provides educational services, acting specifically as an “education as a benefit” platform. The Company connects educational institutions with companies and professionals, and currently has more than 75,000 courses linked with corporate education benefits to help employees in their career development.

The transaction was closed for R$ 5,000, with an additional earn out of R$ 11,254 to be paid in 2024. See Notes 4 and 17 for further information.

For the year ended December 31, 2020

(a) Follow-on public offering

On June 04, 2020, Arco completed a follow-on public offering of 5,563,203 Class A common shares, offered by General Atlantic Arco (Bermuda), L.P. (“GA”), and Alfaco Holding Inc. (the “Selling Shareholders”), at a public offering price of U$ 47.70. Arco did not receive any proceeds from the sale of the Class A common shares by the Selling Shareholders. Neither Arco nor any of its other shareholders, including its founding shareholders and members of management, sold Class A common shares in this offering.

On September 8, 2020, the Company completed a follow-on public offering of 2,500,000 Class A common shares issued by Arco at a public offering price of US$44.80.

The public offering resulted in gross proceeds of US$112.0 million (or R$591.9) for the Company. The Company received net proceeds of US$109,760 (or R$580,059), after deducting US$2,240 (or R$11,839) in underwriting discounts and commissions. In addition, the Company incurred in the amount of R$ 4,452 for audit, consulting and legal services related to the offering. These transactions costs, net of taxes, are classified in equity as a reduction of the gross proceeds resulting from the public offering.

(b) Internal restructurings

PSD Educação S.A. (“PSD”)

On August 01, 2020, continuing the corporate restructuring, PSD Educação S.A. incorporated the companies Positivo Soluções Didáticas Ltda.and Editora Piá Ltda. When PSD Educação S.A. acquired these entities, goodwill and fair value adjustments recognized in the amount of R$830,028 and R$726,876, respectively, were not tax deductible. However, as a result of the corporate restructuring, PSD Educação S.A now has tax benefits from the deductibility of the amortization of goodwill and fair value adjustments of R$529,347 (tax rate of 34%). The fair value adjustments are deductible over the next 5 to 20 years, according to the useful lives of the identified is deductible over 7.5 years, as defined by the Company's Management, under Brazilian tax laws.

(c) Acquisition of investments

Geekie Desenvolvimento de Softwares S.A. (“Geekie”)

On November 27, 2020, the Company signed a new shareholders’ agreement and based on the new terms defined, on that date the Company acquired control of Geekie and the investee became a consolidated subsidiary of Arco.

Bewater Ventures I GA Fundo de Investimento em Participações Multiestratégia (“Bewater”)

On July 24, 2020, the Company acquired a 14.48% interest in Bewater Ventures I GA FIP - Multiestratégia, a fund managed by Paraty Capital, through the purchase of 9,670 Class B quotas for R$9,670 as described in Note 11. The fund´s main goal was to make a minority investment in Grupo A, a company that provides educational solutions for higher education, which happened subsequently to our investment.

Escola da Inteligência Cursos Educacionais Ltda. (“EI” or “Escola da Inteligência”)

On August 28, 2020, the Company announced that it entered into a definitive agreement to acquire Escola da Inteligência, the leading solution in social-emotional learning (SEL) in Brazil.

On November 13, 2020, the Company received approval of the transaction from Brazil’s Administrative Council for Economic Defense – CADE, with no restrictions, and the Company concluded the transaction on December 2, 2020. Accordingly, on that date, the Company, through its subsidiary PSD, acquired control of EI.

WPensar S.A. (“WPensar”)

On September 21, 2020, the Company acquired control of WPensar S.A. through the acquisition of the remaining 75.0% interest and started to consolidate it as subsidiary of the Company with 100.0% interest in the share capital.

Studos Software Ltda. (“Studos”)

On September 21, 2020, the Company acquired the control of Studos Software Ltda. (“Studos”) by acquiring 100.0% of its outstanding ordinary shares and voting interests.

2 Significant accounting policies

2.1 Basis of preparation of the consolidated financial statements

Statement of compliance

The Company’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for certain financial assets, derivative financial instruments, the share-based compensation plan and accounts payable to selling shareholders from business combinations that have been measured at fair value.

Arco is a holding company and considers the currency of the local environment of the its subsidiaries in Brazil as its functional currency, which is its primary source of revenue. Therefore, the functional currency of the Company is the Brazilian real and the consolidated financial statements are presented in Brazilian reais (“BRL” or “R$”). All amounts are rounded to the nearest thousands, except when otherwise indicated.

The Company has prepared these consolidated financial statements on the basis that it will continue to operate as a going concern.

The consolidated financial statements provide comparative information in respect of the previous periods.

2.2 Basis of consolidation and investments in associates

The consolidated financial statements comprise the financial statements of the Company, its subsidiaries and investments in associates as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020.

The table below is a list of the Company’s subsidiaries and investments:

				Direct and indirect interest
Name	Principal activities	Country	Investment type		2022		2021		2020
Arco Educação S.A.	Holding	Brazil	Subsidiary		100.0	%	100.0	%	100.0	%
Arce Participações Ltda.	Holding	Brazil	Subsidiary		100.0	%	100.0	%	-
Companhia Brasileira de Educação e Sistemas de Ensino S.A.	Educational content	Brazil	Subsidiary		100.0	%	100.0	%	100.0	%
Barra Américas Editora Ltda	Educational content	Brazil	Subsidiary		-		-		100.0	%
Distribuidora de Material Didático Desterro Ltda.	Educational content	Brazil	Subsidiary		-		-		100.0	%
SAS Sistema de Ensino Ltda.	Educational content	Brazil	Subsidiary		-		-		100.0	%
Arco Ventures S.A.	Educational content	Brazil	Subsidiary		-		-		100.0	%
SAS Livrarias Ltda.	Educational content	Brazil	Subsidiary		-		-		100.0	%
SAE Digital S.A.	Educational content	Brazil	Subsidiary		100.0	%	100.0	%	100.0	%
International School Serviços de Ensino, Treinamento e Editoração, Franqueadora S.A.	Educational content	Brazil	Subsidiary		51.5	%	51.5	%	51.5	%
Nave à Vela Ltda.	Educational content	Brazil	Subsidiary		-		-		51.0	%
Atech Soluções Tecnológicas S.A.	Educational technology	Brazil	Subsidiary		100.0	%	100.0	%	100.0	%
NLP Soluções Educacionais S.A.	Educational content	Brazil	Subsidiary		100.0	%	100.0	%	100.0	%
WPensar S.A.	Educational technology	Brazil	Subsidiary		100.0	%	100.0	%	100.0	%
Geekie Desenvolvimento de Softwares S.A. (a)	Educational technology	Brazil	Subsidiary		-		57.4	%	56.0	%
Studos Software Ltda. (b)	Educational content	Brazil	Subsidiary		-		100.0	%	100.0	%
NSE Soluções Educacionais S.A.	Educational content	Brazil	Subsidiary		60.0	%	60.0	%	60.0	%
Me Salva! Cursos e Consultorias S.A.	Educational content	Brazil	Subsidiary		100.0	%	60.0	%	-
Quadrado Mágico Desenvolvimento e Licenciamento de Software S.A. (b)	Educational content	Brazil	Subsidiary		-		100.0	%	-
Desenvoolva – Educação, Treinamento e Consultoria Corporativa Ltda.	Educational content	Brazil	Subsidiary		100.0	%	100.0	%	-
P2D Educação Ltda. (a)	Educational content	Brazil	Subsidiary		-		100.0	%	-
Bewater Ventures I GA Fundo de Investimento em Participações Multiestratégia	Private equity	Brazil	Investee		10.9	%	11.0	%	14.5	%
INCO Limited	Collection services	Cayman Islands	Investee		24.9	%	26.1	%	-
Tera Treinamentos Profissionais Ltda.	Educational content	Brazil	Investee		23.4	%	23.4	%	-

(a) During the year, the entity was incorporated by Companhia Brasileira de Educação e Sistemas de Ensino S.A. as described in Note 1.2 (a).

(b) During the year, the entity was incorporated by Atech Soluções Tecnológicas S.A. as described in Note 1.2 (a).

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Control is achieved when the Company is exposed to, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if, and only if, it has: (i) Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee), (ii) Exposure, or rights, to variable returns from its involvement with the investee, and (iii) The ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including: (i) The contractual arrangements with the other vote holders of the investee, (ii) Rights arising from other contractual arrangements, and (iii) The Company’s voting rights and potential voting rights.

Assets, liabilities, income and expenses of a subsidiary acquired or disposed during the year are included in the consolidated financial statements from the date the Company gains control until the date the Company ceases control of the subsidiary.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Company’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Company loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, and any resulting gain or loss is recognized in profit or loss.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statements of income or loss and comprehensive income, changes in equity and financial position, respectively.

2.3 Summary of significant accounting policies

This note provides a description of the significant accounting policies adopted in the preparation of these consolidated financial statements in addition to other policies that have been disclosed in other notes to these consolidated financial statements. These policies have been consistently applied to all periods presented, unless otherwise stated.

a) Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Company elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in general and administrative expenses.

The Company determines that it has acquired a business when the acquired set of activities and assets include an input and a substantive process that together significantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical to the ability to continue producing outputs, and the inputs acquired include an organized workforce with the necessary skills, knowledge, or experience to perform that process or it significantly contributes to the ability to continue producing outputs and is considered unique or scarce or cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs.

When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances, and pertinent conditions as of the acquisition date.

Any contingent consideration to be transferred by the acquirer is recognized at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments, is measured at fair value with the changes in fair value recognized in the statement of income or loss in accordance with IFRS 9. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value recognized in profit or loss.

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Company re-assesses whether it has correctly identified all the assets acquired and all the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in the statement of income or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each CGU that is expected to benefit from the combination.

Where goodwill has been allocated to a segment and part of the operation within that segment is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the segment unit retained.

The current Brazilian tax law allows the deductibility of the acquisition date goodwill and fair value of net assets acquired when a corporate reorganization occurs after acquisition by the Company (i.e., when the Company merges or spins off the businesses acquired). Until such action occurs, the tax and accounting bases of the net assets acquired are the same as of the acquisition date and no deferred tax effects are recognized.

Certain acquired subsidiaries utilize the presumed profit regime as described in Note 24.a) to calculate income taxes. Under this regime, there is no difference between the carrying amount and related tax basis of assets and liabilities and therefore no deferred income taxes were recorded in these financial statements at acquisition date or any subsequent periods.

b) Investment in associates and joint venture

An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Company’s investments in its associate and joint venture are accounted for using the equity method.

Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Company’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint ventures is included in the carrying amount of the investment and is not tested for impairment separately.

The statement of income or loss reflects the Company’s share of the results of operations of the associate or joint venture. In addition, when there has been a change recognized directly in the equity of the associate or joint venture, the Company recognizes its share of any changes, when applicable, in the statement of changes in equity.

The aggregate of the Company’s share of profit or loss of an associate and a joint venture is shown on the face of the statement of income or loss outside operating profit and represents profit or loss after tax of the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Company. When necessary, adjustments are made to bring the accounting policies in line with those of the Company.

After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on its investment in its associate or joint venture. At each reporting date, the Company determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognizes the loss within share of profit (loss) of equity-accounted investees in the statement of income or loss.

c) Current versus non-current classification

The Company presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

● Expected to be realized or intended to be sold or consumed in the normal operating cycle;

● Held primarily for the purpose of trading;

● Expected to be realized within twelve-months after the reporting period; or

● Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve-months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

● It is expected to be settled in the normal operating cycle;

● It is held primarily for the purpose of trading;

● It is due to be settled within twelve-months after the reporting period; or

● There is no unconditional right to defer the settlement of the liability for at least twelve-months after the reporting period.

The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

The Company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

d) Fair value measurement

The Company measures certain financial instruments such as, financial assets, financial investments, derivatives and financial liabilities at fair value at each balance sheet date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either.

● in the principal market for the asset or liability; or

● in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

● Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

● Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

● Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the financial statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

At each reporting date, the Company analyzes the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Company’s accounting policies. For this analysis, the Company verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.

The Company also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities based on the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above. See Note 26 for further information.

e) Financial instruments – initial recognition and measurement

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

i) Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Company’s business model for managing them. Except for trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient are measured at the transaction price under IFRS 15.

For a financial asset to be classified and measured at amortized cost or fair value through other comprehensive income (OCI), it should give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.

The Company’s business model for managing financial assets refers to how it manages its financial assets to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortized cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows while financial assets classified and measured at fair value through OCI are held within a business model with the objective of both holding to collect contractual cash flows and selling.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified as: amortized cost or fair value through profit or loss. There are no financial assets designated as fair value through OCI.

Financial assets at amortized cost

Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired.

The Company’s financial assets at amortized cost include trade receivables and certain financial investments.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognized in the statement of profit or loss. This category includes derivative financial instruments.

A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognized in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Company’s consolidated statement of financial position) when:

● The rights to receive cash flows from the asset have expired; or

● The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement-and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of its continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.

Impairment

Further disclosures relating to impairment of financial assets are also provided in the following notes:

● Disclosures for significant assumptions - Note 3

● Trade receivables, including contract assets - Note 7

The Company recognizes an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

For trade receivables, the Company applies a simplified approach in calculating ECLs. Therefore, the Company does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

The Company considers a financial asset in default when contractual payments are 360 days past due. Management considers this period of maturity to be adequate considering the Company's business model and the historical customer's payment since the contracts are signed annually and during this period the Company can negotiate the payment of the security reducing the credit risk. However, in certain cases, the Company may also consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before considering any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

ii) Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and financing, payables, or as derivative financial instruments, as appropriate.

All financial liabilities are recognized initially at fair value and, in the case of loans and financing and payables, net of directly attributable transaction costs.

The Company’s financial liabilities include trade payables, loans and financing, derivative financial instruments from acquisition of interests and accounts payable to selling shareholders.

Subsequent measurement

For purposes of subsequent measurement, financial liabilities are classified in two categories:

● Financial liabilities at fair value through profit or loss

● Financial liabilities at amortized cost (loans and financing)

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered by the Company that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognized in the statement of income or loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied.

Financial liabilities at amortized cost (loans and financing)

After initial recognition, interest-bearing loans and financing are subsequently measured at amortized cost using the effective interest rate (EIR) method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

Amortized cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of income or loss. This category generally applies to interest-bearing loans and financing at Note 15.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of income or loss.

iii) Offsetting of financial instruments

Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.

f) Derivative financial instruments

Initial recognition and subsequent measurement

The Company has derivative financial instruments such as put options from investments and forward currency swaps to protect its exposure to foreign currency risks. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Any gains or losses arising from changes in the fair value of derivatives are recorded directly to finance result in the statements of income or loss.

g) Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash in banks and on hand and short-term highly liquid financial investments with an original maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value.

h) Inventories

Inventories are measured at the lower of cost or net realizable value. The costs of inventories are based on the average cost method and include costs incurred on the purchase of inventories, editorial production costs and other costs incurred in bringing them to their current location and condition. Costs of purchased inventory are determined after deducting any discounts and recoverable taxes.

Educational content relates to costs incurred to prepare the educational content. These costs include incurred personnel costs and third parties’ services for editing educational content and related activities (graphic design, editing, proofreading and layout, among others).

The inventory reserve for educational content is calculated based on their expected net realizable value. Inventory reserve corresponds to a reserve for inventory obsolescence and is recorded in cost of sales. It is estimated based on the amount of educational content from prior collections which are no longer used for sale and educational content which the Company expects will not be sold based on the actual sales. In determining the inventory reserve, the Company considers management’s current assessment of the marketplace, industry trends and projected product demand as compared to the number of units currently in inventory.

i) Property and equipment

Property and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:

Machinery and equipment	10%
Vehicles	20%
Furniture and fixtures	10%
IT equipment	20% to 33%
Facilities	10%
Leasehold improvements	20% to 33%

An item of property and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on 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 or loss when the asset is derecognized.

The residual values, useful lives and methods of depreciation of property and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

j) Leases

The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Company as a lessee

The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

Right-of-use assets

The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term, as follows:

Buildings	1 to 4 years
Equipment	1 to 4 years

If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. Right-of use assets are also subject to impairment.

Lease liabilities

At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Company applies the short-term lease recognition exemption to its short-term leases of properties (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term.

Company as a lessor

The Company does not enter into leasing agreements as a lessor.

k) Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.

The Company capitalizes the costs directly related with the development of the educational platforms used to deliver content. These costs are substantially comprised of technology related services and payroll expenses, recorded as internally developed software in the educational platform accounting ledger. Development expenditure is capitalized only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognized in the statement of income or loss as incurred. After initial recognition, development expenditure is measured at cost less accumulated amortization and any accumulated impairment losses.

Costs associated with maintaining internally developed software are recognized as an expense as incurred.

The useful lives of intangible assets are assessed as finite.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of income or loss in the expense category that is consistent with the function of the intangible assets.

An intangible asset is derecognized upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon 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 or loss.

l) Impairment of non-financial asset

Further disclosures relating to impairment of non-financial assets are also provided in the following notes:

● Disclosures for significant accounting judgments, estimates and assumptions - Note 3

● Property and equipment - Note 12

● Intangible assets - Note 14

● Goodwill - Note 14

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing is required for goodwill and intangibles with indefinite lives, the Company estimates the asset’s recoverable amount. The recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate, equivalent to the pre-tax discount rate, that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are considered. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company’s CGUs to which the individual assets are allocated. These budgets and forecast calculations cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations are recognized in the statement of income or loss in expense categories consistent with the function of the impaired asset.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of income or loss.

Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. An operating segment is the lowest level within the Company at which the goodwill is monitored for internal management purposes and therefore impairment tests of goodwill have been carried out at each operating segment level. Impairment is determined for goodwill by assessing the recoverable amount of each operating segment to which the goodwill relates. When the recoverable amount is less than the carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

m) Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is presented in the statement of income or loss net of any reimbursement, when applicable.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

n) Labor and social obligations

Labor and social obligations are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

o) Share-based payments

Certain key executives of the Company receive remuneration in the form of share-based compensation, whereby the executives render services as consideration for equity instruments (equity-settled transactions).

Equity-settled transactions

The expenses of equity-settled transactions are determined by the fair value at the date when the grant is made using an appropriate valuation model. That expense is recognized in general and administrative expenses, together with a corresponding increase in equity (share-based compensation reserve), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of income or loss for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Company’s best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.

No expense is recognized for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

When the terms of an equity-settled award are modified, the minimum expense recognized is the grant date fair value of the unmodified award, provided the original vesting terms of the award are met. An additional expense, measured as at the date of modification, is recognized for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss.

The dilutive effect of outstanding options is considered in the computation of diluted earnings per share (see Note 20).

Cash-settled transactions

A liability is recognized for the fair value of cash-settled transactions. The fair value is measured initially and at each reporting date up to and including the settlement date, with changes in fair value recognized in employee benefits expense. The fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The fair value is determined using a Black & Scholes model. The approach used to account for vesting conditions when measuring equity-settled transactions also applies to cash-settled transactions.

p) Revenue from contracts with customers

Revenue from sale of education content

The Company sells educational content to private schools, which is delivered through printed and digital formats. Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled, i.e., at the moment it delivers the content to private schools in printed and digital format when the Company fulfills its performance obligation, and the revenue from these contracts is recognized at a point of time. Each contract contemplates penalties ranging between 20% to 100% of the remaining total value of the contract in the event of termination. However, the content already delivered to the private schools is not returned to the Company unless the contractual return conditions are met.

The Company has concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customers.

Revenue is driven by the number of students enrolled in each school and is based on a value negotiated with each contract through the conditions contained in the terms of sales. The technology is provided solely in support of the best use of its content. Both printed and digital content are the same.

The Company provides printed content capable of delivering the entire K-12 curriculum. The Company also provides digital content for the purpose of supporting the printed content, and includes video lessons, online homework and assessments that are not customized and have no stand-alone value if used separately or outside of the main context. In this context, the digital content and related features are an evolution from a totally printed methodology to a broader approach and will continue to evolve and change in the coming years but are currently still deeply entwined with the printed content.

Pursuant to the terms of the contracts, each year by the end of November the schools are required to provide the Company with an estimate of the number of enrolled students that will access the content in the next school year (which typically starts in February of the following year), allowing the Company to start the delivery of its educational content. Since the contracts with the schools allows product returns or increase in the number of enrolled students up to a certain limit, the Company recognizes revenue for the amount that is expected to be received based on past experience, assuming that the other conditions for revenue recognition are met. A right of return asset (and corresponding adjustment to cost of sales) is also recognized for the right to recover the goods from the customer.

The asset is measured at the former carrying amount of the inventory, less any expected costs to recover the goods and any potential decreases in value. The Company updates the measurement of the asset for any revisions to the expected level of returns and any additional decreases in the value of the returned products.

Revenue from services

The Company provides services related to school management for private schools and students, and technological solutions for communicating with students' parents and a learning platform for students and teachers, which are delivered through monthly software licenses. Revenue from contracts with customers is recognized when the control of services is transferred to the customer for an amount that reflects the consideration to which the Company expects to be entitled for the exchange of services, that is, when it releases the license to use services of software for private schools.

The Company generates subscription revenue from the sale of user licenses, in which customers can use the services of online school management software. The services are sold directly to schools that bundle the subscription with their own services provided to end customers. The Company fulfills its performance obligation, and the revenue from these services is recognized on a straight-line basis during the subscription period.

Subscription revenue is driven by the number of students enrolled in each customer and is based on a value negotiated with each subscriber through the conditions contained in the terms of use.

Interest income

For all financial instruments measured at amortized cost, interest income is recorded using the effective interest rate (EIR) method. The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income includes also gain from financial investments classified as financial assets at fair value through profit or loss. Interest income is included in finance income in the statement of income or loss.

Costs to obtain a contract

The Company incurs costs to obtain each sales contract and recognizes as an asset the incremental costs of obtaining a contract with a customer if the entity expects to recover those costs. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained.

q) Taxes

Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date.

Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred income tax liabilities are recognized for all taxable temporary differences, except:

● When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

● In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint venture, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except:

● When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

● In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint venture, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The current Brazilian legislation allows the amortization of goodwill in at least 5 years, for tax purposes, in cases of merger, spin-off or incorporation. Thus, it is possible to have a tax benefit from goodwill in the incorporation since it has been generated in the acquisition of interests from third parties.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred income tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred income tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

The Company offsets deferred income tax assets and liabilities if the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred income tax liabilities or assets are expected to be settled or recovered.

Sales tax

Expenses and assets are recognized net of the amount of sales tax, except:

● When the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item, as applicable;

● When receivables and payables are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position

r) Treasury shares

Own equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

s) Foreign currencies

The consolidated financial statements are presented in Brazilian Reais, which is also the Company and its subsidiaries’ functional currency. For each entity, the Company determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded by the Company’s entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognized in profit or loss.

(d) Information related to Covid-19 pandemic

The beginning of 2022 was characterized by a significant growth in COVID-19 cases, thus state and municipal governments took restrictive measures to contain a possible new wave of the virus. These measures have been relaxed as the number of cases decreased compared to the beginning of the year.

The initial restrictive measures taken by Brazilian states and local authorities directly impacted the education industry by indefinitely postponing on-site school activities at the beginning of the pandemic. However, in 2022 school activities returned to the presential modality.

Notwithstanding the above, despite the gradual release of the restrictions by the authorities, most of its workforce is working on site applying a hybrid model.

The Company continues putting in place to safeguard the health and safety of the Company’s employees, customers, and suppliers, and direct and indirect interest principal investment have not limited the Company’s ability to maintain its operations. In addition, these alternative working arrangements have not adversely affected financial reporting systems, internal control over financial reporting or disclosure controls and procedure.

As of December 31, 2022, the Company did not recognize any additional expenses related to COVID-19, mainly due to flexibility of restricted measures and the high percentage of the target population vaccinated in Brazil.

Given the uncertainty around the extent and timing of the future spread of COVID-19, the imposition of additional protective measures, or the relaxation of existing protective measures, it is not possible to accurately predict COVID-19’s general impact on the education industry in Brazil or to reasonably estimate its impact on Arco’s results of operations, cash flows or financial condition, including, but not limited to:

● A decrease in the number of students, which may impact the expected amount of revenue.

● An increase in bad debts due to the current economic scenario.

● An adverse change in the fair value of financial instruments recognized on the Company’s books.

● The need for renegotiation of loans and lease agreements to ensure the continued strength of the Company’s financial position.

The Company does not expect to incur additional expenses from COVID-19, but Management will continue to monitor and assess the impact COVID-19 may have on the Company’s business operations, financial performance, financial position, and cash flows.

2.4 Changes in accounting policies and disclosures

New and amended standards and interpretations

The Company applied for the first-time certain standards and amendments, which became effective for annual periods beginning on or after 1 January 2022 (unless otherwise stated). The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37

An onerous contract is a contract under which the unavoidable of meeting the obligations under the contract costs (i.e., the costs that the Company cannot avoid because it has the contract) exceed the economic benefits expected to be received under it.

The amendments specify that when assessing whether a contract is onerous or loss-making, an entity needs to include costs that relate directly to a contract to provide goods or services including both incremental costs (e.g., the costs of direct labor and materials) and an allocation of costs directly related to contract activities (e.g., depreciation of equipment used to fulfil the contract and costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract.

These amendments had no impact on the consolidated financial statements of the Company. The Company intends to use the practical expedients in future periods if they become applicable.

Reference to the Conceptual Framework – Amendments to IFRS 3

The amendments replace a reference to a previous version of the IASB’s Conceptual Framework with a reference to the current version issued in March 2018 without significantly changing its requirements.

The amendments add an exception to the recognition principle of IFRS 3 Business Combinations to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21 Levies, if incurred separately. The exception requires entities to apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the Conceptual Framework, to determine whether a present obligation exists at the acquisition date.

The amendments also add a new paragraph to IFRS 3 to clarify that contingent assets do not qualify for recognition at the acquisition date.

These amendments had no impact on the consolidated financial statements of the Company as there were no contingent assets, liabilities or contingent liabilities within the scope of these amendments that arose during the period.

Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 Leases

The amendment prohibits entities from deducting from the cost of an item of property, plant and equipment, any proceeds of the sale of items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the costs of producing those items, in profit or loss.

In accordance with the transitional provisions, the Company applies the amendments retrospectively only to items of PP&E made available for use on or after the beginning of the earliest period presented when the entity first applies the amendment (the date of initial application).

These amendments had no impact on the consolidated financial statements of the Company as there were no sales of such items produced by property and equipment made available for use on or after the beginning of the earliest period presented.

IFRS 1 First-time Adoption of International Financial Reporting Standards – Subsidiary as a first-time adopter

The amendment permits a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported in the parent’s consolidated financial statements, based on the parent’s date of transition to IFRS, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary. This amendment is also applied to an associate or joint venture that elects to apply paragraph D16(a) of IFRS 1.

These amendments had no impact on the consolidated financial statements of the Company as it is not a first-time adopter.

IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities

The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. There is no similar amendment proposed for IAS 39 Financial Instruments: Recognition and Measurement.

In accordance with the transitional provisions, the Company applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment (the date of initial application). These amendments had no impact on the consolidated financial statements of the Company.

These amendments had no impact on the consolidated financial statements of the Company as it did not have assets in scope of IAS 41 as at the reporting date.

Standards issued but not yet effective

The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these new and amended standards and interpretations, if applicable, when they become effective. The Company is assessing the impact that changes in the standards will have in current practice, but does not expect a significant or any impact to occur on the Company’s financial statements:

● Amendments to IAS 1: Classification of Liabilities as Current or Non-current

● Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

● Definition of Accounting Estimates (Amendments to IAS 8)

● Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

3 Significant accounting judgements, estimates and assumptions

The preparation of the Company’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Accounting estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are recognized prospectively.

Other disclosures relating to the Company’s exposure to risks and uncertainties includes:

● Capital management – Note 27

● Financial instruments risk management – Notes 26 and 27

● Sensitivity analyses disclosures – Note 27

Estimates and assumptions

The key assumptions about the future and other key sources of estimation uncertainty as of the reporting date that include a significant risk of a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances that arise and that are beyond the Company’s control. Such changes are reflected in the assumptions where they occur.

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit (“CGU”) or group of CGU exceeds its recoverable amount, defined as the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on data available from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs of disposing of the asset. The value in use calculation is based on a discounted cash flow model (“DCF” model). The cash flows are derived from the budget for the next five years and do not include restructuring activities to which the Company has not yet committed or significant future investments that will enhance the performance of the assets of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as to expected future cash-inflows and the growth rate used for extrapolation purposes. The Company determined that its operating segments are the cash generating units. These estimates are most relevant to goodwill that are recognized by the Company. The key assumptions used to determine the recoverable amount for the different operating segments, including a sensitivity analysis, are disclosed and further explained in Note 14.

Inventory allowance

The Company recognizes a provision for disposal of inventory considering content from previous collections not sold and a prospective model to estimate the forecast of obsolescence of products from current collections. The applied model considers the historical data of non-realization of products to obtain the expected loss percentages. Any significant changes between the observed losses compared to the historical loss pattern impact the expected loss percentages estimated by the Company. See Note 8 for further information.

Provision for expected credit losses of trade receivables and contract assets

The Company uses a provision matrix to calculate ECLs for trade receivables and contract assets. The provision rates are based on days past due for customer. The provision matrix is initially based on the Company’s historical observed default rates. The Company calibrates the matrix to adjust the historical credit loss experience with forward-looking information.

The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Company’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. The information about the ECLs on the Company’s trade receivables and contract assets is disclosed in Note 7.

Share-based payment

Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option or appreciation right, volatility and dividend yield and making assumptions about them. For the measurement of the fair value of equity-settled transactions, the Company uses the Black & Scholes model. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 18.b).

Taxes

Deferred income tax assets are recognized for deductible temporary differences and unused tax credits from net operating losses carryforward to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgement is required to determine the amount of deferred income tax assets that can be recognized, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.

The Company has R$ 157,786 (2021: R$ 104,329) in deferred income tax on tax loss carryforwards. Additionally, there is R$ 10,355 (2021: R$ 12,902) of unrecognized tax loss carryforwards as of December 31, 2022 related to subsidiaries that have a history of losses. Such unused tax loss carryforwards do not expire and may not be used to offset taxable income of other subsidiaries of the Company. See Note 24 for further information.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs into these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required to estimate fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect the reported fair value of financial instruments. See Note 26 for further disclosures.

Contingent consideration, resulting from business combinations, is valued at fair value as of the acquisition date as part of the business combination. When the contingent consideration meets the definition of a financial liability, it is subsequently remeasured at each reporting date. This determination of fair value is based on discounted cash flows. The key assumptions taken into consideration are the probability of meeting each performance target and the discount factor (see Notes 6 and 26 for additional information).

4 Business combinations and acquisition of non-controlling interests

The company did not enter into any business combinations during the year. The following information relates to business combinations that occurred in the comparative period.

The fair value of the identifiable assets and liabilities as of the date of each acquisition was:

	Fair value as of the acquisition date
	2021
	Me Salva!			Eduqo			Edupass			P2D
Assets
Cash and cash and equivalents		10,562			1,112			362			24,136
Trade receivables		2,010			300			23			17,786
Inventories		80			-			-			23,348
Recoverable taxes		7			50			-			1,175
Deferred taxes		-			-			-			3,137
Advance to employees		-			-			-			109
Other assets		160			4			102			2,622
Property and equipment		145			74			-			319
Right-of-use assets		112			270			-			-
Intangible assets		12,022			9,097			3,702			168,187
		25,098			10,907			4,189			240,819
Liabilities
Trade payables		614			77			56			8,738
Labor and social obligations		296			232			42			5,205
Taxes and contributions payable		211			657			519			65
Leases		112			270			-			-
Loans and financing		91			119			-			-
Advances from customers		322			-			22			202
Other liabilities		2,263			4			-			6,113
		3,909			1,359			639			20,323
Net identifiable assets acquired at fair value		21,189			9,548			3,550			220,496
Goodwill arising on acquisition		28,326			22,422			11,679			560,075
Purchase consideration		49,515			31,970			15,229			780,571
Cash paid		15,778			15,097			2,000			788,985
Capital contribution		10,000			-			-			-
Accounts payables to selling shareholders arising from acquisition (Note 17)		22,196			16,076			13,229			-
Retained payments		1,324			-			-			-
Price adjustment		217			797			-			(8,414	)
Analysis of cash flows on acquisition:
Transaction costs of the acquisition (included in cash flows from operating activities)		(486	)		(390	)		(191	)		(13,629	)
Cash paid and subscribed capital net of cash acquired with the subsidiary (included in cash flows from investing activities)		(15,433	)		(13,985	)		(1,638	)		(764,849	)

(a) Me Salva! Cursos e Consultorias S.A. (“Me Salva!”)

On March 10, 2021, the Company acquired control of Me Salva!, by acquiring 60.0% of the outstanding shares on the acquisition date.

The purchase consideration transferred was R$ 49,515, comprised of:

For acquisition of 60%: (i) R$ 15,779 related to cash consideration paid on the acquisition date; (ii) R$ 10,000 capital contribution paid on the acquisition date; (iii) R$ 1,324 retained for the period of 5 years for any eventual inaccuracies in the fulfillment of the guarantees given in the purchase and sale agreement, which will be released in five annual installments; and (iv) R$ 217 determined as an “acquisition price adjustment.

For acquisition of remaining 40%: (i) R$ 22,196, representing the present value of the amount that will be paid in March 2025. Because the price is not fixed, the Company considers the payment as contingent consideration, and the financial liability is measured at FVPL and no non-controlling interest has been recognized.

The Company did not recognize deferred taxes related to the business combination because the tax basis and the accounting basis, including fair value adjustments, were the same at the date of the business combination. As mentioned in Note 1.2I, on December 9, 2022, the Company acquired the remaining 40% of Me Salva!’s shares.

Goodwill

The goodwill recorded on the acquisition was R$ 28,326 and it is expected to be deductible for tax purposes after the Company incorporates the acquiree. For the purposes of impairment testing, the goodwill has been allocated to the Supplemental operating segment.

The goodwill is primarily attributable to the expected synergies and other benefits from combining the assets and activities of Me Salva! With those of the Company. The goodwill paid is based on the Business Plan prepared for purposes of the acquisition, and the principal business assumptions used were considered by management as appropriate.

Transaction costs

Transaction costs of R$ 486 were expensed and are included in general and administrative expenses as of December 31, 2021.

(b) Quadrado Mágico Desenvolvimento e Licenciamento de Software S.A. (“Eduqo”)

On July 1, 2021, the Company acquired control of Eduqo, by acquiring 100% of the outstanding shares on the acquisition date.

Eduqo provides educational services, acting specifically in the Learning Management System (LMS) segment.

The purchase consideration transferred was R$ 31,970, comprised of: (i) R$ 15,097 cash consideration paid on the acquisition date; (ii) R$ 16,076 related to seller financing, representing the present value of fixed price that will be paid in two installments on each anniversary date of the transaction, and (iii) of R$ 797 determined as an acquisition price adjustment. See Note 17 for further information.

The Company did not recognize deferred taxes related to the business combination because the tax basis and the accounting basis, including fair value adjustments, were the same at the date of the business combination.

Goodwill

The goodwill recorded on the acquisition was R$ 22,422 and it is expected to be deductible for tax purposes after the Company incorporates the acquiree. For the purposes of impairment testing, the goodwill has been allocated to the Supplemental operating segment.

The goodwill acquired is primarily attributable to the expected synergies and other benefits from combining the assets and activities of Eduqo with those of the Company. The goodwill paid is based on the Business Plan prepared for purposes of the acquisition, and the principal business assumptions used were considered by management as appropriate.

Transaction costs

Transaction costs of R$ 390 were expensed and are included in general and administrative expenses as of December 31, 2021.

(c) Desenvoolva – Educação, Treinamento e Consultoria Corporativa Ltda. (“Edupass”)

On September 3, 2021, the Company acquired control of Edupass, by acquiring 100% of the outstanding shares on the acquisition date.

Edupass connects education institutions with companies and professionals, helping employees in their career development.

The purchase consideration was R$ 15,229, comprised of: (i) R$ 2,000 cash consideration paid on the acquisition date; (ii) R$ 1,975 related to seller financing which will be paid in two installments on each anniversary of the transaction; and (iii) an additional earn-out of R$ 11,254, representing the present value of the amount that will be paid in 2024. Because the R$ 11,254 is not a fixed price but subject to a formula, the Company considers the payment as contingent consideration and the liability is measured at FVPL.

The Company did not recognize deferred taxes related to the business combination because the tax basis and the accounting basis, including fair value adjustments, were the same at the date of the business combination.

Goodwill

The goodwill recorded on the acquisition was R$ 11,679 and it is expected to be deductible for tax purposes after the Company incorporates the acquiree. For the purposes of impairment testing, the goodwill has been allocated to the Supplemental operating segment.

The goodwill acquired is primarily attributable to the expected synergies and other benefits from combining the assets and activities of Edupass with those of the Company. The goodwill paid is based on the Business Plan prepared for purposes of the acquisition, and the principal business assumptions used were considered by the administration as appropriate.

Transaction costs

Transaction costs of R$ 191 were expensed and are included in general and administrative expenses as of December 31, 2021.

(d) P2D Educação Ltda. (“P2D”)

On March 6, 2021, the Company announced that it entered into a definitive agreement to acquire COC and Dom Bosco, two important K-12 learning systems in Brazil.

On October 1, 2021, Arco concluded the acquisition of 100% of the capital stock of P2D.

The purchase consideration was R$ 780,571, comprised of: (i) R$ 788,985 cash consideration paid on the acquisition date; and (ii) R$ 8,414 of price adjustments calculated after the acquisition, to be paid by Pearson, reducing the acquisition price. The price adjustment is under discussion between both parties and its payment is more likely to occur in the first semester of 2022.

The transaction was subject to customary closing conditions, including antitrust and other regulatory approvals. After the preliminary antitrust approval from Brazil’s Administrative Council for Economic Defense – CADE, which occurred on September 30, 2021, Arco closed the acquisition of P2D on October 1, 2021, becoming a subsidiary of Company.

The Company did not recognize deferred taxes related to the business combination because the tax basis and the accounting basis, including fair value adjustments, were the same at the date of the business combination.

Goodwill

The goodwill recorded on the acquisition was R$ 560,075 and it is expected to be deductible for tax purposes after the Company incorporates the acquiree. For the purposes of impairment testing, the goodwill has been allocated to the Core operating segment.

The goodwill acquired is primarily attributable to the expected synergies and other benefits from combining the assets and activities of Edupass with those of the Company. The goodwill paid is based on the Business Plan prepared for purposes of the acquisition, and the principal business assumptions used were considered by the administration as appropriate.

Transaction costs

Transaction costs of R$ 13,629 were expensed and are included in general and administrative expenses as of December 31, 2021.

(e) Measurement of fair value

The valuation techniques used for measuring the fair value of separate identified intangible assets acquired were as follows:

Entity	Asset acquired	Valuation technique
Me Salva!	Customer relationship	Multi-period excess earning method The method considers the present value of net cash flows expected to be generated by customer relationship, by excluding any cash flows related to contributory assets
Eduqo
Edupass
P2D
Me Salva!	Non-compete agreement	With-and-without method The With-and-Without method consists of estimating the fair value of an asset by the difference between the value of this asset in two scenarios: a scenario considering the existence of the asset in question and another, considering its non-existence.
Eduqo
Edupass
P2D
Me Salva!	Trademarks	Relief-from-royalty method The relief-from-royalty method considers the discount estimated royalty payments that are expected to be avoided as a result of the educational platform being owned.
Edupass
P2D
Me Salva!	Software	Replacement cost The method considers the amount that an entity would have to pay to replace at the present time, according to its current worth.
Eduqo
Edupass
Me Salva! Eduqo P2D	Educational platform	Replacement cost The method considers the amount that an entity would have to pay to replace at the present time, according to its current worth.

(f) Revenue and profit contribution

The individual net revenue and net income from the acquisition date through each period end for all business combinations are presented below:

	December 31, 2021
	Me Salva!			Eduqo		Edupass			P2D
Total revenue		6,929			2,511		434			38,081
Net income (loss) before income taxes		(4,961	)		988		(505	)		7,497

Total revenue and income (loss) before income taxes for the Company are presented below assuming the acquisitions had occurred at the beginning of the year:

	2021
Total revenue		1,271,921
Net income (loss) before income taxes		(185,101	)

This additional financial information is presented for informational purposes only and does not purport to represent what the Company’s results of operations would have been had it completed the acquisition on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods.

5 Cash and cash equivalents

	2022		2021
Cash and bank deposits		11,772		20,085
Bank deposits in foreign currency (a)		14,143		154
Cash equivalents (b)		190,445		190,904
		216,360		211,143

Cash and cash equivalents are held for the purpose of meeting short-term cash needs and include cash on hand, deposits with banks and other short-term highly liquid investments with original maturities of three-month or less and with immaterial risk of change in value.

(a) Short-term deposits maintained in U.S. dollar.

(b) Cash equivalents correspond to financial investments in Bank Certificates of Deposit (“CDB”) issued by highly credit-rated financial institutions authorized to operate by the Central Bank of Brazil. As of December 31, 2022, the average interest on these CDBs was equivalent to 82.3% (December 31, 2021: 90.4%) of the Interbank Certificates of Deposit (“CDI”). The average CDI rate during the year ended December 31, 2022 was 12,38% (2021: 4,39%). These financial investments are available for immediate use and have insignificant risk of changes in value.

6 Financial investments

	2022		2021
Financial investments (a)		422,140		1,013,550
Other		506		506
		422,646		1,014,056
Current		391,785		973,294
Non-current		30,861		40,762

(a) Financial investments correspond mainly to investments in bank deposit certificates (CDB) and automatic applications of cash balances, managed by highly credit-rated financial institutions authorized to operate by the Central Bank of Brazil, with maturity of more than three months from the date of acquisition. As of December 31, 2022, the average interest on these investments is equivalent to 105,7% (2021: 101.7%) of the CDI. The average CDI rate during the year ended December 31, 2022 was 12,38% (2021: 4,39%). Income received on financial investments is classified as investing activity in the cash flow statements.

7 Trade receivables

	2022			2021
From sales of educational content		933,894			676,787
From related parties (Note 10)		8,255			3,608
		942,149			680,395
(-) Allowance for expected credit losses		(85,262	)		(87,132	)
		856,887			593,263

As of December 31, 2022 and 2021, the aging of trade receivables were as follows:

	2022		2021
Neither past due nor impaired		777,469		567,490
Past due		164,680		112,905
1 to 60 days		40,719		15,383
61 to 90 days		16,314		8,403
91 to 120 days		10,710		10,347
121 to 180 days		18,346		16,284
More than 180 days		78,591		62,488
		942,149		680,395

The Company reviews its allowance for expected credit losses each year following a detailed review of receivable balances and historical payment profiles, and assessment of forward-looking risk factors. Management believes all the remaining receivable balances are fully recoverable.

The movement in the allowance for expected credit losses for the years ended December 31, 2022, 2021 and 2020, was as follows:

	2022			2021			2020
Balance at beginning of the year		(87,132	)		(63,434	)		(30,051	)
Reversion / (Provision)		2,247			(26,610	)		(34,684	)
Receivables written off (reverted) during the period as uncollectible		(377	)		2,912			1,301
Balance at end of year		(85,262	)		(87,132	)		(63,434	)

8 Inventories

	2022		2021
Content providing		135,876		75,778
Educational content (a)		94,089		71,314
Consumables and supplies		2,204		2,128
Inventories held by third parties		21,891		9,362
		254,060		158,582

(a) Costs being incurred to produce educational content. These costs include incurred personnel costs and third parties’ services for editing educational content and related activities (graphic design, editing, proofreading and layout, among others).

Content providing is presented net of inventory reserve. The movement in the inventory reserve for the years ended December 31, 2022, 2021 and 2020 was as follows:

	2022			2021			2020
Balance at beginning of the year		(25,715	)		(7,510	)		(6,517	)
Inventory reserve		(40,671	)		(26,778	)		(7,453	)
Write-off of inventories against reserve		7,763			8,573			6,460
Balance at end of year		(58,623	)		(25,715	)		(7,510	)

During 2022, R$ 40,671 (2021: R$ 26,778) was recognized as an expense for inventories carried at net realizable value. This is recognized in cost of sales.

9 Recoverable taxes

	2022		2021
Withholding Income Tax (IRRF) on financial investments		7,416		3,079
Recoverable IRPJ and CSLL		18,617		11,400
Recoverable PIS and COFINS		30,695		44,097
Recoverable INSS		18,215		2,216
Other recoverable taxes		3,331		235
		78,274		61,027
Current		67,166		38,811
Non-current		11,108		22,216

10 Related parties

The table below summarizes the balances and transactions with related parties:

	2022		2021
Assets
Trade receivables (Note 7)
Livraria ASC Ltda. And Educadora ASC Ltda. (a)		8,255		3,546
OISA Tecnologia e Serviços Ltda. (c)		-		62
		8,255		3,608
Other assets
Arco Instituto de Educação (b)		1,526		1,373
		1,526		1,373
Loans to related parties
Minority shareholders - Geekie		-		4,571
Minority shareholders - EI (d)		3,956		6,750
Former shareholders - Eduqo		-		4
Former shareholders - Edupass		-		65
		3,956		11,390
Current		3,956		4,571
Non-current		-		6,819
Advances from customers
Livraria ASC Ltda. and Educadora ASC Ltda. (a)		-		9
		-		9
Other liabilities
OISA Tecnologia e Serviços Ltda. (c)		11		258
		11		258

	2022		2021		2020
Revenue
Livraria ASC Ltda. and Educadora ASC Ltda. (a)		8,605		8,831		7,230
OISA Tecnologia e Serviços Ltda. (c)		400		226		4
		9,005		9,057		7,234
Expenses
ASC Empreendimentos Ltda. and OSC Empreendimentos Ltda.		-		-		(1	)
Finance income
WPensar S.A.		-		-		30
Minority shareholders  - Geekie		273		210		453
OISA Tecnologia e Serviços Ltda.		-		19		18
Minority shareholders - EI (d)		498		336		18
		771		565		519

(a) Companhia Brasileira de Educação e Sistemas de Ensino and International School sell educational content to Livraria AsC Ltda. and Educadora ASC Ltda., entities controlled by the Company’s controlling shareholders. The transactions are priced based on contract price at the sales date.

(b) Arco is a founding member of Instituto Arco de Educação ("Arco ”nstituto"), a non-profit association whose purpose is to support and encourage education through the generation of knowledge. The Company has amounts receivable from Arco Instituto arising from the reimbursement of expenses paid by Arco. The amounts are not subject to financial charges and the payment of the amount related to the operations in 2021 occurred in July 2022. The outstanding amount in December is related to the operation in 2022.

(c) WPensar provides financial intermediation services to OISA. Amounts collected by WPensar are transferred to OISA net of the value of the service provided. As of December 31, 2022 the recognized revenue from financial intermediation was R$ 400 (2021: R$ 226).

(d) Amount due from minority shareholders of Escola da Inteligência, with an interest rate of 100% CDI and maturing in May 2023. During the year, the Company recognized R$ 498 of interest income (2021: R$ 336).

Key management personnel compensation

Key management personnel compensation comprised the following:

	2022		2021		2020
Short-term employee benefits		63,130		60,845		39,628
Restricted stock units		58,603		51,231		48,852
		121,733		112,076		88,480

Compensation of the Company’s key management includes short-term employee benefits comprised by salaries, bonuses, labor and social charges, and other ordinary short-term employee benefits.

Certain executive officers also participate in the Company’s share-based compensation plan (Note 18.b).

11 Investments and interests in other entities

(a) Investments

Bewater Ventures I GA Fundo de Investimento em Participações Multiestratégia (“Bewater”)

On July 24, 2020, the Company, through its subsidiary Companhia Brasileira de Educação e Sistemas de Ensino S.A. (“CBE”) acquired 9,670 Class B quotas of Bewater Ventures I GA Fundo de Investimento em Participações Multiestratégia, a fund managed by Paraty Capital. The Company paid R$ 9,670, corresponding to a total interest of 14.5% in Bewater. On February 2, 2021, Bewater carried out a new round of capital injection, in which the Company acquired an additional 27 class B quotas, resulting in an 11.1% interest in the fund. On August 12, 2021, Bewater had a new round of investments, in which the Company acquired an additional 16 class B quotas, resulting in an 11.0% interest in the fund. On February 17, 2022, and on August 5, 2022, Bewater carried out new investment rounds, in which the Company acquired an additional 19 and 12 class B quotas, respectively. As of December 31, 2022, the Company holds a 10.9% interest in the fund.

The fund made a Iinority investment in Group A, a company that provides educational solutions for higher education. The investment in Bewater is measured at fair value through profit and loss and recorded at finance result.

INCO Limited (“INCO”)

On January 25, 2021, the Company entered into a Share Purchase Agreement with INCO Limited, or INCO, the controlling entity of OISA, a company that provides financial and administrative services to private schools, according to which 8,571,427 series B ordinary shares were acquired, equivalent to 30% of the total stock capital of INCO, for a total amount of R$25,000. On April 27, 2021, Arco invested an addition R$33,195, and an additional R$ 52,035 on September 27, 2021, resulting in a 26.09% interest. The Company recorded R$ 17,712 (2021: R$ 14,022) as gain on changes of interest of investment for the year ended on December 31, 2022.

As of December 31, 2022, the Company holds a 24.93% interest due to the dilution of its interest resulting from another round of investments that the investors made without capital injection from Arco, with the average price per share higher than the average price of Arco’s participation on the equity’s shares. This operation resulted on a gain of R$ 17,712, and this amount is recognized in other income (expenses) in statement of income or loss.

Tera Treinamentos Profissionais Ltda. (“Tera”)

On April 9, 2021, the Company entered into a Share Purchase Agreement with Tera Treinamentos Profissionais Ltda, a company that provides professional courses focused on the development of digital skills,according to which 8,234 shares were acquired, equivalent to 23.43% of the total stock capital of Tera, for a total amount of R$15,000. Based on the signed agreement, the Company does not have control of Tera but exercises significant influence over the entity.

(i) Investments and interests in other entities

Reconciliation of carrying amount:

	2022												2021
	INCO			TERA			Bewater			Total			Total
At beginning of the year		102,421			14,649			9,803			126,873			9,654
Capital contributions		-			-			32			32			125,273
Fair value on investment		-			-			1,379			1,379			106
Gain resulting from changes in ownership		17,712			-			-			17,712			14,022
Share of loss of equity-accounted investees		(32,438	)		(1,927	)		-			(34,365	)		(22,182	)
At end of the year		87,695			12,722			11,214			111,631			126,873
Percentage of ownership		24.93	%		23.43	%		10.88	%

(ii) Summary financial information for subsidiaries, joint ventures and affiliates

	Inco			Tera
December 31, 2022
Current assets		317,240			6,629
Non-current assets		192,040			2,430
Current liabilities		65,917			4,261
Non-current liabilities		48,323			2,342
Equity		395,040			2,456
Revenue		163,520			19,359
Costs and expenses		(288,760	)		(27,858	)
Loss for the year		(125,240	)		(8,499	)
December 31, 2021
Current assets		379,880			11,191
Non-current assets		125,643			1,837
Current liabilities		84,686			1,893
Non-current liabilities		5,872			50
Equity		414,966			11,085
Revenue		47,470			14,944
Costs and expenses		(119,162	)		(15,283	)
Loss for the year		(71,692	)		(340	)

12 Property and equipment

Reconciliation of carrying amount:

	Machinery and equipment			Vehicles			Furniture and fixtures			IT equipment			Facilities			Leasehold improvements			Others			Total
Cost
As of December 31, 2020		1,991			307			3,929			12,895			123			14,478			6,722			40,445
Additions		453			-			759			56,290			112			1,381			1,083			60,078
Disposals		(67	)		-			(222	)		(432	)		-			-			(415	)		(1,136	)
Business combination		10			-			65			413			-			50			-			538
As of December 31, 2021		2,387			307			4,531			69,166			235			15,909			7,390			99,925
Additions		251			-			657			8,206			-			3,794			1,414			14,322
Disposals		(39	)		(11	)		(281	)		(3,015	)		(59	)		-			-			(3,405	)
As of December 31, 2022		2,599			296			4,907			74,357			176			19,703			8,804			110,842
Depreciation
As of December 31, 2020		(253	)		(126	)		(706	)		(3,661	)		(35	)		(4,616	)		(4,961	)		(14,358	)
Depreciation charge for the year		(391	)		(72	)		(478	)		(4,529	)		(16	)		(4,419	)		(2,021	)		(11,926	)
Disposals		32			-			26			185			1			-			-			244
As of December 31, 2021		(612	)		(198	)		(1,158	)		(8,005	)		(50	)		(9,035	)		(6,982	)		(26,040	)
Depreciation charge for the year		(398	)		(64	)		(616	)		(22,327	)		(17	)		(3,929	)		(1,395	)		(28,746	)
Disposals		21			16			156			2,561			32			-			189			2,975
As of December 31, 2022		(989	)		(246	)		(1,618	)		(27,771	)		(35	)		(12,964	)		(8,188	)		(51,811	)
Net book value
As of December 31, 2020		1,738			181			3,223			9,234			88			9,862			1,761			26,087
As of December 31, 2021		1,775			109			3,373			61,161			185			6,874			408			73,885
As of December 31, 2022		1,610			50			3,289			46,586			141			6,739			616			59,031

The Company assesses at each reporting date, whether there is an indication that a property and equipment asset may be impaired. If any indication exists, the Company estimates the asset’s recoverable amount. There were no indications of impairment of property and equipment as of and for the years ended December 31, 2022, 2021 and 2020.

13 Leases

The balance sheet shows the following amounts relating to leases:

	2022		2021
Right-of-use assets
Properties		15,326		24,586
IT Equipment		52,738		10,635
Machinery and equipment		632		739
		68,696		35,960

	2022		2021
Lease liabilities
Current		34,329		20,122
Non-current		42,576		22,996
		76,905		43,118

Set out below, are the carrying amounts of the Company’s right-of-use assets and lease liabilities and the movements during the period:

	Right-of-use assets			Lease Liabilities
As at December 31, 2020		30,022			35,220
Additions		22,146			22,146
Disposal		(334	)		(329	)
Lease modification (a)		200			200
Depreciation expense		(16,456	)		-
Business combination		382			382
Interest expense		-			4,795
Payments of lease liabilities		-			(15,729	)
Discounts on leases		-			(273	)
Interest paid		-			(3,294	)
As at December 31, 2021		35,960			43,118
Additions		54,848			54,848
Lease modification (a)		13			13
Depreciation expense		(22,125	)		-
Business combination		-			-
Interest expense		-			4,422
Payments of lease liabilities		-			(21,485	)
Discounts on leases		-			(20	)
Interest paid		-			(3,991	)
As at December 31, 2022		68,696			76,905
Average annual depreciation rate 2021		29.4	%
Average annual depreciation rate 2022			%

(a) Refers to price adjustments that occur annually as defined in the lease agreements.

The Company entered into fiduciary agreements with Banco Safra S.A. in the amount of R$ 10,903 to guarantee payment due in the lease agreements of the São Paulo office. This financial agreement bears interest at the rate of 1.95% per annum. The lease payments are adjusted annually by the General Market Price Index (IGP-M).

The Company recognized rent expense from short-term leases and low-value assets of R$ 2,637 for the year ended December 31, 2022 (2021: R$ 2,673)

14 Intangible assets and goodwill

	Goodwill			Rights on contracts			Customer relationships			Educational system			Copyrights			Software license and development			Trademarks			Educational platform			Non-compete agreement			In Progress			Total
Cost
As of December 31, 2020		1,394,351			15,263			322,143			280,998			29,460			45,317			476,354			170,348			11,856			1,857			2,747,947
Acquisitions		-			-			-			-			7,914			43,569			101			75,516			985			23,233			151,318
Disposals		-			-			-			-			-			(9	)		-			(252	)		-			-			(261	)
Acquisitions through business combinations		622,502			-			26,197			45,138			179			10,023			66,250			39,771			5,450			-			815,510
Finalization of price allocation (c)		(66,952	)		-			-			-			-			-			-			-			-			-			(66,952	)
Transfer		-			-			-			-			-			-			-			23,018			-			(23,018	)		-
As of December 31, 2021		1,949,901			15,263			348,340			326,136			37,553			98,900			542,705			308,401			18,291			2,072			3,647,562
Acquisitions (a)		-			-			-			-			9,580			37,355			14,312			93,675			1,477			9,447			165,846
Finalization of price allocation (b)		975			-			-			-			-			-			-			-			-			-			975
Transfer		-			-			-			-			15,635			-			-			(5,156	)		-			(10,479	)		-
As of December 31, 2022		1,950,876			15,263			348,340			326,136			62,768			136,255			557,017			396,920			19,768			1,040			3,814,383
Amortization
As of December 31, 2020		-			(6,818	)		(38,237	)		(49,175	)		(18,103	)		(9,741	)		(27,315	)		(46,164	)		(2,757	)		-			(198,310	)
Amortization		-			(1,735	)		(35,368	)		(33,682	)		(8,031	)		(16,561	)		(26,559	)		(66,970	)		(3,236	)		-