XML 38 R21.htm IDEA: XBRL DOCUMENT v3.21.1
16 Property, plant and equipment
 12 Months Ended
Dec. 31, 2020
Property, plant and equipment [abstract]  
Property, plant and equipment
16 Property, plant and equipment

 

Property, plant and equipment is stated at cost, net of accumulated depreciation and/or impairment losses, if any. The cost includes the acquisition amount of equipment and borrowing costs for long-term construction projects if recognition criteria are observed. When significant components of property, plant and equipment are replaced, these components are recognized as individual assets, with specific useful lives and depreciation. Likewise, when a major replacement is performed, its cost is recognized as the carrying amount of the equipment as a replacement, if the recognition criteria are met. All other repair and maintenance costs are recognized in the statement of operations for the year as incurred.

 

Asset Category Average annual depreciation rate in %
Buildings 2.47
Leasehold improvements 4.15
Machinery and equipment 11.91
Facilities 6.81
Furniture and appliances 11.42

 

Property, plant and equipment items and eventual significant amounts are written-off upon sale or when there is no expectation of future economic benefits deriving from their use or sale. Any gains or losses resulting from disposals of assets are included in the statement of operations for the year.

 

The residual value, the useful life of assets, and methods of depreciation are reviewed at the end of each fiscal year, and adjusted prospectively, where applicable. The Company reviewed the useful life of property, plant and equipment in 2020 and no significant changes were deemed necessary.

 

Interest on borrowings and financing directly attributable to the acquisition, construction of an assets, that requires a substantial period of time to be completed for its intended use or sale (qualifying asset), are capitalized as part of the cost of respective assets during its construction phase. From the date that the asset is placed in operation, capitalized costs are depreciated over the estimated useful life of the asset.

 

16.1 Impairment of non-financial assets

 

The Company tests its non-financial assets for impairment annually or whenever there is internal or external evidence that they may be impaired.

 

An assets or cash-generating unit’s recoverable amount is defined as the asset’s fair value less cost to sell or its value in use, whichever is higher.

 

If the carrying amount of an asset or cash-generating units exceeds its recoverable value, the asset is considered impaired and an impairment loss is recorded to adjust the carrying amount of the asset or cash-generating unit to its recoverable value. When assessing the recoverable value, the estimated future cash flow is discounted to the present value, using a discount pre-tax rate, which represents the Company’s weighted average cost of capital to reflect current market valuations as to the time value of money and asset’s specific risks. The impairment test of intangible assets’ useful life including goodwill is described in note 17.

 

Impairment losses are recognized in the statement of operations in categories of expenses consistent with the function of the respective impaired asset. The impairment loss previously recognized is only reversed if there has been a changed in the assumptions used to determine the recoverable amount since the last impairment loss was recognized.

 

16.2 Impairment test of stores operating assets

 

An impairment assessment is performed on operating assets (property, plant and equipment) and intangible assets (such as Commercial rights) directly attributable to stores, as follows:

 

  • Step 1: the carrying amount of properties in rented stores was compared to a sales multiple (35%) representing transactions between retail companies. Stores for which the multiple of sales was lower than their carrying amount and owned stores, a more detailed test is made, as described in Step 2 below.
  • Step 2: The Company considered the highest value between: a) the discounted cash flows of stores using sales growth average of 5.6% in 2020 (4.5% in 2019) for period exceeding the next five years and a discount rate of 9.8% in 2020 (8.7% in 2019) and; b) appraisal reports drawn up by independent experts for own stores.

 

The Company assessed if any of its long-lived assets were impaired on December 31, 2020 and 2019 and concluded that the recognition of an impairment loss was not needed.

 

The impairment losses are recognized in the statement of operations in categories of expenses consistent with the function of the respective impaired asset. The impairment loss previously recognized is only reversed if there is any alteration in the assumptions adopted to define the asset’s recoverable value in its initial or most recent recognition, except for goodwill, which cannot be reversed in future periods.

 

16.3 Property, plant and equipment rollforward

 

    As of December 31, 2019     Additions     Remeasurement     Write-off     Depreciation     Transfer and others     Conversion adjustment to reporting currency    

Corporate restructuring

(Note 1.3) 

     Discontinued operation     As of December 31, 2020  
Land     2,766       61       —         (32 )     —         (70 )     541       146       (2,931 )     481  
Buildings     3,829       78       —         (85 )     (121 )     (139 )     704       —         (3,657 )     609  
Improvements     2,207       694       —         (71 )     (189 )     293       70       (4 )     (402 )     2,598  
Equipment     1,242       227       —         (28 )     (260 )     84       151       (1 )     (780 )     635  
Facilities     330       58       —         (6 )     (32 )     (16 )     8       —         (73 )     269  
Furnitures and appliances     601       78       —         (15 )     (128 )     58       66       —         (320 )     340  
Constructions in progress     140       344       —         (7 )     —         (318 )     18       —         (99 )     78  
Others     42       8       —         —         (16 )     12       —         (2 )     (7 )     37  
Subtotal     11,157       1,548       —         (244 )     (746 )     (96 )     1,558       139       (8,269 )     5,047  
Lease - right of use:                                                                                
Buildings     3,449       1,217       628       (588 )     (501 )     2       403       (4 )     (2,183 )     2,423  
Equipment     43       23       (7 )     (1 )     (15 )     3       9       —         (49 )     6  
Land     3       —         —         —         —         —         —         —         (3 )     —    
Subtotal     3,495       1,240       621       (589 )     (516 )     5       412       (4 )     (2,235 )     2,429  
Total     14,652       2,788       621       (833 )     (1,262 )     (91 )     1,970       135       (10,504 )     7,476

 

    As of December 31, 2018     Additions     Purchase Partnership     Remeasurement     Write-off     Depreciation     Transfer and others    

Currency

translation adjustment

    As of December 31, 2019  
Land     348       76       2,277       —         —         —         25       40       2,766  
Buildings     583       231       2,935       —         —         (25 )     56       49       3,829  
Improvements     1,733       553       334       —         (302 )     (123 )     12       —         2,207  
Equipment     416       232       672       —         (20 )     (93 )     25       10       1,242  
Facilities     221       66       64       —         (1 )     (20 )     2       (2 )     330  
Furnitures and appliances     226       81       300       —         (8 )     (40 )     36       6       601  
Constructions in progress     39       69       154       —         (3 )     —         (122 )     3       140  
Others     29       4       6       —         —         (11 )     14       —         42  
Subtotal     3,595       1,312       6,742       —         (334 )     (312 )     48       106       11,157  
Lease - right of use:                                                                        
Buildings     1,053       670       1,727       138       (28 )     (140 )     (3 )     32       3,449  
Equipment     7       15       25       —         —         (5 )     (1 )     2       43  
Land     —         —         3       —         —         —         —         —         3  
Subtotal     1,060       685       1,755       138       (28 )     (145 )     (4 )     34       3,495  
Total     4,655       1,997       8,497       138       (362 )     (457 )     44       140       14,652  

 

    As of January 1, 2018     Additions     Remeasurement     Write-off     Depreciation     Transfers and others (*)     As of December 31, 2018  
Land     261       45       —         —         —         42       348  
Buildings     437       170       —         (3 )     (13 )     (8 )     583  
Improvements     1,346       421       —         (30 )     (95 )     91       1,733  
Equipment     351       142       —         (8 )     (69 )     —         416  
Facilities     178       57       —         (3 )     (15 )     4       221  
Furniture and appliances     169       79       —         (5 )     (26 )     9       226  
Constructions in progress     43       52       —         (12 )     —         (44 )     39  
Others     28       11       —         —         (10 )     —         29  
Subtotal     2,813       977       —         (61 )     (228 )     94       3,595  
Lease – right of use:                                                        
Buildings     901       210       52       (13 )     (97 )     —         1,053  
Equipment     11       —         —         —         (4 )     —         7  
Subtotal     912       210       52       (13 )     (101 )     —         1,060  
Total     3,725       1,187       52       (74 )     (329 )     94       4,655

 

16.4 Breakdown

 

    As of December 31,  
    2020     2019  
    Historical cost     Accumulated depreciation     Net amount     Historical cost     Accumulated depreciation     Net amount  
Land     481       —         481       2,766       —         2,766  
Buildings     704       (95 )     609       4,034       (205 )     3,829  
Improvements     3,203       (605 )     2,598       3,023       (816 )     2,207  
Equipment     1,061       (426 )     635       2,326       (1,084 )     1,242  
Facilities     354       (85 )     269       477       (147 )     330  
Furniture and appliances     513       (173 )     340       1,163       (562 )     601  
Construction in progress     78       —         78       140       —         140  
Others     101       (64 )     37       110       (68 )     42  
      6,495       (1,448 )     5,047       14,039       (2,882 )     11,157  
Finance lease     —         —                                    
Buildings     3,205       (782 )     2,423       4,198       (749 )     3,449  
Equipment     47       (41 )     6       92       (49 )     43  
Land     —         —         —         6       (3 )     3  
      3,252       (823 )     2,429       4,296       (801 )     3,495  
Total Property plant and equipment     9,747       (2,271 )     7,476       18,335       (3,683 )     14,652

 

16.5 Guarantees

 

On December 31, 2020 and 2019, the Company had collateralized property, plant and equipment items offered as a guarantee to certain legal claims, as disclosed in note 20.5.

 

16.6 Capitalized borrowing costs

 

The capitalized borrowing costs for the year ended December 31, 2020 were R$12 (R$11 on December 31, 2019 and R$12 on December 31, 2018). The rate used for the capitalization of borrowing costs was 150.67% (136.11% on December 31, 2019 and 101.78% on December 31, 2018) of CDI, corresponding to the effective interest rate of loans taken by the Company

 

16.7 Additions to property, plant and equipment for cash flow presentation purpose are as follows:

 

    2020     2019     2018  
Additions     2,788       1,997       1,187  
Leases     (1,241 )     (685 )     (210 )
Capitalized interest     (12 )     (11 )     (12 )
Financing of property, plant and equipment – Additions (i)     (1,437 )     (1,217 )     (921 )
Financing of property, plant and equipment – Payments (ii)     1,464       1,273       863  
Total     1,562       1,357       907  
  (i) Additions relate to the acquisition of operating assets, purchase of land and buildings to expansion activities, building of new stores, improvements of existing distribution centers and stores and investments in equipment and information technology.
  (ii) The additions to property, plant and equipment above are presented to reconcile the acquisitions during the year with the amounts presented in the statement of cash flows net of items that did not impact cash flow.
16.8 Other information

 

On December 31, 2020 the Company recorded in the cost of sales and services the amount of R$34 (R$29 on December 31, 2019 and R$10 on December 31, 2018), relating to the depreciation of machinery, building and facilities of distribution centers.