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Cosan S.A. Indústria e Comércio
Financial statements ended
December 31, 2016
(A free translation of the original in Portuguese)
2
Cosan S.A. Indústria e Comércio
Financial statements
For December 31, 2016
Contents
Independent auditors’ report financial statements. .......................... 3
Statement of financial position ........................................................ 4
Statements of profit or loss and other comprehensive
income .............................................................................................. 6
Statements of changes in shareholders’ equity ................................ 8
Statements of cash flows .................................................................. 11
Statements of value added ................................................................ 13
Notes to the financial statements ..................................................... 14
3
Independent Auditor´s Report on the individual and consolidated
financial statements
To the Board of Directors and Shareholders of
Cosan S.A. Indústria e Comércio
São Paulo – SP
Opinion
We have audited the individual and consolidated financial statements of Cosan S.A. Indústria e Comércio (“the
Company”), identified as parent company and consolidated, respectively, which comprise the statement of
financial position as at December 31, 2016, the statements of profit or loss, comprehensive income, changes in
equity and cash flows for the year then ended, as well as the corresponding notes, comprising a the significant
accounting policies and other explanatory information.
In our opinion, the accompanying financial statements present fairly, in all material respects, the individual and
consolidated financial position of Cosan S.A. Indústria e Comércio as at December 31, 2016, and its individual
and consolidated financial performance and its individual and consolidated cash flows for the year then ended in
accordance with accounting practices adopted in Brazil and in accordance with International Financial Reporting
Standards (IFRS) issued by International Accounting Standards Board (IASB).
Basis for Opinion
We conducted our audit in accordance with Brazilian and International Standards on Auditing (ISAs). Our
responsibilities, under those standards, are further described in the following section Auditors’ Responsibilities
for the Audit of the individual and consolidated Financial Statements. We are independent of the Company and
its subsidiaries in accordance with the ethical requirements that are relevant in the Accountant Professional Code
of Ethics and professional standards issued by the Federal Counsel of Accounting, and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the current period. These matters were addressed in the context of our audit of the individual and consolidated
financial statements as a whole, and in forming our opinion on the individual and consolidated financial
statements, and we do not provide a separate opinion on these matters.
Measurement of financial instruments (Notes 3.3 and 31) - Parent Company and Consolidated
To finance its operations and investments in non-monetary assets, the Company's subsidiaries raise funds from
third parties whose conditions expose them to risks related to fluctuations in foreign currency and interest rates.
In order to reduce such exposure, the Company enters into derivative financial instruments, mainly interest rate
and foreign exchange swaps, and forward contracts. Derivative financial instruments, including instruments
designated for risk protection (fair value hedge) and certain debt instruments designated at fair value through
profit or loss, are valued using valuation techniques that generally involve the exercise of judgment, use of
assumptions and estimates. Due to the relevance, this matter was considered significant for our audit.
How our audit addressed this matter
Our audit procedures included tests of internal controls on the process of identification, measurement,
management, recognition and classification of these financial instruments. We obtained the list of financial
institutions with which the Company holds financial instrument contracts and obtained a confirmation letter on
outstanding balances at December 31, 2016. With the assistance of our specialists in financial instruments, we
4
performed an independent recalculation of the fair value of derivative financial instruments and debt instruments
designated at fair value through profit or loss using observable data such as quoted prices in active markets or
discounted cash flows based on market curves. We also evaluate the adequacy of the disclosures made in the
financial statements, especially in relation to sensitivity analysis, interest rate and foreign exchange risks and the
classification of the instruments.
Designation and effectiveness of derivative financial instruments for hedge accounting - fair value hedges
(Notes 3.3 and 31) - Parent Company and Consolidated
The Company's subsidiaries contract derivative financial instruments to manage their exposure to exchange rate
and interest rate risks arising during the normal course of their business. When appropriate, certain derivative
financial instrument contracts (swaps) are designated for hedge accounting (fair value hedge) in order to offset
the Company's exposure to interest rate changes. Due to the relevance of the hedged financial instruments, the
high degree of judgment and estimates used and the possible impacts on the financial statements, this matter was
considered significant for our audit.
How our audit addressed this matter
Our audit procedures included tests of internal controls on the process of identification, designation,
measurement and management of these financial instruments. With the assistance of our specialists in financial
instruments, we evaluated the adequacy of the documentation prepared by the Company to demonstrate the
reconciliation between the hedged item versus the instrument designated for hedge accounting and we performed
the recalculation of the prospective and retrospective coverage effectiveness test prepared by Company. We also
consider the adequacy and sufficiency of the disclosures made in the financial statements.
Recoverability of deferred income and social contribution taxes (Notes 3.14 and 22) - Parent Company
and Consolidated
The Company's subsidiaries recognized deferred tax assets related to temporary differences and unused tax
losses, which are considered recoverable based on the availability of future taxable profits.
The estimated availability of future taxable profits requires judgment and interpretation of tax laws. The
recoverable amount of the deferred tax assets recognized may vary significantly if different assumptions are
applied to the projection of future taxable profits and to the capacity to use tax losses, which may impact the
deferred tax asset recognized in the financial statements and at the effective tax rate of period. For these reasons,
this matter was considered significant for our audit.
How our audit addressed this matter
We evaluated the design, implementation and operational effectiveness of internal controls related to the
preparation and review of the projection of future taxable profits, specifically the business plan and budget. We
compared the budget approved in previous year with the actual results incurred in order to verify the Company's
ability to project future results. With the assistance of our corporate finance specialists, we evaluate the
reasonableness of the key assumptions used to support the projection of future taxable profits, including growth
and discount rates. Additionally, with the assistance of our tax specialists, we considered the appropriateness of
applying tax laws and tax deductions. We also assessed whether the Company's projections indicated sufficient
future taxable profit against which unused tax losses and deductible temporary differences could be used, as well
as the adequacy of the disclosures made in the financial statements.
5
Impairment of goodwill arising in business combinations (Notes 3.7 and 17) - Parent Company and
Consolidated
The acquisition of the lubricant operations in previous years resulted in the recognition of goodwill, which the
recoverable amount must be evaluated annually. The determination of the recoverable amount of the Company's
cash-generating units involves significant judgments in determining the assumptions used in the cash flow
projections, including growth and discount rates, and may result in a material impact on the goodwill. For these
reasons, this matter was considered significant for our audit.
How our audit addressed this matter
We have evaluated the internal controls related to the identification and measurement of the recoverable amount
of the Company's cash generating units. With the assistance of our corporate finance specialists, we have
evaluated the key assumptions used in discounted cash flows, including growth and discount rates, based on
historical information. We evaluated the sensitivity of results considering reasonably possible changes in the key
assumptions and compared the budgets approved in previous year with the actual results incurred in order to
verify the Company's ability to project future results. Additionally, we compared the recoverable amount
calculated based on the discounted cash flows per cash generating unit with the corresponding carrying amounts
of the cash generating units and we evaluated the adequacy of the disclosures made in the financial statements.
Equity method on jointly-controlled entity (Note 13) - Parent Company and Consolidated
The Company has an indirect interest in the jointly-controlled entity Raízen Energia S.A., which operates in the
production and trade of sugar, ethanol and cogeneration of energy, mainly produced from sugarcane bagasse.
Due to the segment in which it operates, the valuation of biological assets is subject to a significant judgment
involving: estimated harvest area, productivity forecast, discount rates, quantity and projected prices. Due to the
relevance of the investment in Raízen Energia S.A. and due to the degree of judgment and estimates used in the
valuation of biological assets, this matter was considered significant for our audit.
How our audit addressed this matter
We planned and communicated the scope of our work, discussed the risks of material misstatement and sent
instructions to the auditors of the jointly-controlled entity. We held meetings with the auditors responsible for the
jointly-controlled entity, and evaluated the work performed on the valuation of biological assets, the audit
evidence obtained and the documentation of the experts involved in the audit of the jointly-controlled entity. We
have analyzed the communications and reports submitted by the jointly-controlled entity's auditor, as well as the
procedures performed and the conclusions reached, specifically the determination of materiality, the effect of
uncorrected misstatements and audit procedures performed to address the risks. We also evaluated the adequacy
of the disclosures made in the financial statements.
Other matters
Statements of value added
The individual and consolidated statements of value added (DVA) for the year ended December 31, 2016,
prepared under the responsibility of the Company´s management, and presented as supplementary information
for IFRS purposes, were submitted to audit procedures performed in conjunction with the Company´s financial
statements. For forming our opinion, we assess whether these financial statements are reconciled with the
financial statements and the accounting records, as applicable, and whether its form and content are in
accordance with the criteria defined in Technical Pronouncement CPC 09 – Statement of Added Value. In our
6
opinion, these statement of value added have been adequately prepared, in all material respects, in accordance
with the criteria defined in that Technical Pronouncement and are consistent with the individual and consolidated
financial statements taken as a whole.
Other information accompanying the individual and consolidated financial statements and the auditor's
report
The Company's management is responsible for such other information that comprises the management report.
Our opinion on the financial statements does not cover the management report and we do not express any form
of audit conclusion on this report.
In connection with the audit of the individual and consolidated financial statements, our responsibility is to read
the Management Report and, in doing so, consider whether this report is materially inconsistent with the
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,
based on our work we have performed, we conclude that there is a material misstatement in the management´s
report, we are required to report this fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the individual and consolidated
financial statements
Management is responsible for the preparation and fair presentation of the individual and consolidated financial
statements in accordance with accounting practices adopted in Brazil and in accordance with International
Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and for
such internal control as management determines is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the individual and consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting in the preparation of the financial statements, unless management
either intends to liquidate the Company and its subsidiaries or to cease its operations, or has no realistic
alternative to avoid the closure of operations.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditors’ responsibilities for the Audit of the individual and consolidated financial statement
Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Brazilian and International Standards on Auditing will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the individual and consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
7
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditors’ report to the related
disclosures in the individual and consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’
report. However, future events or conditions may cause the Company to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the individual and consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the group to express an opinion on the individual and consolidated financial statements. We
are responsible for the direction, supervision and performance of the group audit and, we remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
São Paulo, February 16, 2017
KPMG Auditores Independentes
CRC 2SP014428/O-6
Original report in Portuguese signed by
Rogério Hernandez Garcia
Contador CRC 1SP213431/O-5
Cosan S.A Indústria e Comércio
Statement of financial position December 31, 2016
(In thousands of Brazilian Reais - R$)
8
Parent Company Consolidated
Note December 31,
2016
December 31,
2015 (restated)
December 31,
2016
December 31,
2015 (restated)
Assets
Cash and cash equivalents 7 1,066,930 731,049 3,990,930 3,129,530
Marketable securities 8 123,399 - 371,167 97,222
Trade receivables 9 - - 713,468 759,710
Derivative financial instruments 32 - 61,215 17,771 100,532
Inventories 10 - - 346,173 431,117
Related parties 12 48,508 53,758 50,257 86,600
Income tax receivable 155,286 23,779 195,580 95,016
Other current tax receivable 11 3,749 37,041 94,806 135,947
Dividends and interest on capital receivable 142,856 11,116 142,856 11,321
Assets held for sale 16 - - - 111,638
Other financial assets 70,487 - 70,487 144,208
Other current assets 275,637 33,466 310,362 62,982
Total current assets 1,886,852 951,424 6,303,857 5,165,823
Trade receivables 9 - - 40,501 39,597
Deferred income tax and social contribution 23 6,987 - 330,212 335,808
Receivables from related parties 12 189,968 209,738 208,853 221,345
Other recoverable taxes 11 36,708 33,897 79,044 76,475
Judicial deposits 24 269,928 252,513 414,214 413,067
Derivative financial instruments 32 264,647 1,292,514 729,640 2,192,327
Other non-current assets 483,355 837,284 729,534 1,057,888
Investments in associates 13 10,165,963 11,262,812 240,100 140,136
Investments in joint ventures 14 2,713,044 2,821,205 8,506,395 8,237,188
Investment properties 16 - - - 2,595,035
Property and equipment 17 21,577 26,652 389,329 401,800
Intangible assets 18 6,621 6,267 9,328,150 9,447,269
Total non-current 14,158,798 16,742,882 20,995,972 25,157,935
Total Assets 16,045,650 17,694,306 27,299,829 30,323,758
The notes are an integral part of these financial statements.
Cosan S.A Indústria e Comércio
Statement of financial position December 31, 2016
(In thousands of Brazilian Reais - R$)
9
Parent Company Consolidated
Note December 31,
2016
December 31,
2015 (restated)
December 31,
2016
December 31,
2015 (restated)
Liabilities
Loans, borrowings and debentures 19 - 406,348 936,000 1,230,518
Derivative financial instruments 32 9,800 - 35,991 291
Trade payables 21 3,330 1,151 1,467,570 1,544,822
Salaries payable 24,100 17,536 121,009 106,407
Income tax payables 1,294 14,237 47,124 47,720
Other taxes payable 22 82,434 21,025 227,555 120,241
Dividends and interest on capital payable 23,274 23,420 94,055 41,656
Payables to related parties 12 306,806 427,752 150,107 114,559
Other financial liabilities - - 25,734 -
Other current liabilities 21,597 30,620 117,660 138,839
Total current liabilities 472,635 942,089 3,222,805 3,345,053
Loans, borrowings and debentures 19 - - 8,202,129 8,525,185
Preferred shareholders payable
- - - -
in subsidiaries 1,769,427 2,042,878 1,769,427 2,042,878
Derivative financial instruments 32 248,693 137,006 247,550 740,427
Other taxes payable 22 136,720 178,716 136,720 178,716
Provision for legal proceedings 24 287,296 266,540 761,542 703,347
Payables to related parties 12 3,872,619 4,710,651 - -
Post-employment benefits 33 163 126 441,480 344,334
Deferred tax liabilities 23 - 419,291 1,108,748 1,368,638
Other non-current liabilities 292,491 316,243 617,089 705,926
Total non-current liabilities 6,607,409 8,071,451 13,284,685 14,609,451
Total liabilities 7,080,044 9,013,540 16,507,490 17,954,504
Shareholders' equity 26
Share capital 3,824,648 3,822,725 3,824,648 3,822,725
Treasury shares (34,966) (58,694) (34,966) (58,694)
Capital reserve 956,318 955,326 956,318 955,326
Other equity (295,923) (184,691) (295,923) (184,691)
Profit reserve 4,515,529 4,146,100 4,515,529 4,146,100
Equity attributable to:
Owners of the Company 8,965,606 8,680,766 8,965,606 8,680,766
Non-controlling interests 13 - - 1,826,733 3,688,488
Total shareholders' equity 8,965,606 8,680,766 10,792,339 12,369,254
Total shareholders' equity and liabilities 16,045,650 17,694,306 27,299,829 30,323,758
The notes are an integral part of these financial statements.
Cosan S.A Indústria e Comércio
Statements of profit or loss and other comprehensive income For the period ended December 31, 2016 and 2015
(In thousands of Brazilian Reais - R$, except earning per share)
10
Parent Company Consolidated
Note December
31, 2016
December 31,
2015 (restated)
December 31,
2016
December
31, 2015
(restated)
Net sales 28 - - 7,541,793 8,349,181
Cost of sales 29 - - (4,586,552) (5,905,340)
Gross profit - - 2,955,241 2,443,841
Selling expenses 29 - - (1,032,893) (919,166)
General and administrative expenses 29 (134,933) (126,229) (570,465) (565,105)
Other expense, net 30 (86,021) 209,529 (115,764) 192,020
Operating expenses (220,954) 83,300 (1,719,122) (1,292,251)
Income before equity in earning
and financial results
(220,954) 83,300 1,236,119 1,151,590
Equity in earning of associates 13 1,875,845 1,069,414 (12,820) (3,186)
Equity in earnings of joint ventures 14 (108,162) (121,179) 1,570,132 695,165
Equity in earning of investees 1,767,683 948,235 1,557,312 691,979
Finance expense (744,408) (598,774) (1,720,365) (1,395,741)
Finance income 384,590 226,167 799,912 411,838
Foreign exchange (losses) gain, net 828,401 (1,618,196) 1,001,581 (623,164)
Derivatives (1,260,595) 1,240,116 (1,388,997) 459,175
Financial results 31 (792,012) (750,687) (1,307,869) (1,147,892)
Profit (loss) before taxes 754,717 280,848 1,485,562 695,677
Income tax (expenses) benefits 23
Current (15,008) (50,110) (112,633) (141,415)
Deferred 372,433 310,430 52,420 226,633
357,425 260,320 (60,213) 85,218
Profit (loss) from continuing operations 1,112,142 541,168 1,425,349 780,895
Profit from discontinued operation,
net of tax 15
(76,057) 38,915 (35,262) 100,867
Profit (loss) for the period 1,036,085 580,083 1,390,087 881,762
Cosan S.A Indústria e Comércio
Statements of profit or loss and other comprehensive income For the period ended December 31, 2016 and 2015
(In thousands of Brazilian Reais - R$, except earning per share)
11
Other comprehensive income
Items that will never be recalssified to profi or
loss
Actuarial gain on definet beneficit plan (36,140) (19,503) (85,621) (28,895)
Taxes on items that will never be reclassified
to profit or loss - - 28,988 9,824
(36,140) (19,503) (56,633) (19,071)
Items that are or may be reclassified to profit or
loss: -
Foreign currency translation differences 72,399 (56,785) 72,399 (56,785)
(Loss) gain on cash flow hedge in joint
ventures and subsidiary 46,605 (225,205) 46,605 (225,205)
Gain in mensuration financial instrument
derivative 6,000 (60,631) 6,000 (60,631)
Investment property (190,735) - (190,735) -
Fair value of financial assets (9,296) - (9,296) -
Changes in fair value of available for
available for sale securities
(65) 2,135 (65) 8,167
(75,092) (340,486) (75,092) (334,454)
Total other comprehensive income (loss), net
of tax (111,232) (359,989) (131,725) (353,525)
Total comprehensive income 924,853 220,094 1,258,362 528,237
Total net income attributable to:
Owners of the Parent 1,036,085 580,083 1,036,085 580,083
Non-controlling interests - - 354,002 301,679
1,036,085 580,083 1,390,087 881,762
Total comprehensive income attributable to:
Owners of the Parent 924,853 220,094 924,853 220,094
Non-controlling interests - - 333,509 308,143
924,853 220,094 1,258,362 528,237
Basic earnings per share from:
Continuing operations 27 R$2.73742 R$1.33340 R$2.73742 R$1.33340
Discontinuing operations 27 (R$0.18721) R$0.09588 (R$0.18721) R$0.09588
R$2.55021 R$1.42928 R$2.55021 R$1.42928
Diluted earnings per share from:
Continuing operations 27 R$2.67179 R$1.29760 R$2.67179 R$1.29760
Discontinuing operations 27 (R$0.18377) R$0.09331 (R$0.18377) R$0.09331
R$2.48802 R$1.39091 R$2.48802 R$1.39091
The accompanying notes are an integral part of these consolidated financial statements.
Cosan S.A Indústria e Comércio
Statements of changes in shareholder’ equity
For the period ended December 31, 2016 and 2015
(In thousands of Brazilian Reais - R$)
12
Profit reserve
Common
stock
Tresuary
share
Other capital
reserve
Others equity
components Legal
Statutary
reserve
Unrealized
earning
Retained
earrning
accumulated
earning Total
Non-controlling
interest Total equity
At January 1, 2015 3,632,231 (58,694) 950,694 175,298 251,631 2,481,391 217,574 1,168,151 - 8,818,276 3,630,997 12,449,273
New standards and interpretations
adopted (note 5) - - - - - - - (78,920) - (78,920) - (78,920)
At January 1, 2015 (restated) 3,632,231 (58,694) 950,694 175,298 251,631 2,481,391 217,574 1,089,231 - 8,739,356 3,630,997 12,370,353
Profit for the year - - - - - - - - 580,083 580,083 301,679 881,762
Other comprehensive income: Loss on cash flow hedge in joint
ventures and subsidiary - - - (225,205) - - - - - (225,205) - (225,205)
Foreign currency translation differences - - - (56,785) - - - - - (56,785) - (56,785) Actuarial loss on defined benefit plan - - - (19,503) - - - - - (19,503) 432 (19,071)
Loss with financial instrument derivative - - - (60,631) - - - - - (60,631) - (60,631)
Changes in fair value of available for
available for sale securities - - - 2,135 - - - - - 2,135 6,032 8,167
Total comprehensive income
for the year - - - (359,989) - - - - 580,083 220,094 308,143 528,237
Contributions and distributions for shareholders
Staturory reserve - - - - - 474,941 - - (474,941) - - -
Legal reserve - - - - 33,329 - - - (33,329) - - - Use retained earrning - - - - - - - (86,501) 86,501 - - -
Increase captal 190,494 - - - - (190,494) - - - - - -
Effect of distribution of dividends to non-controlling - - (6,154) - - - - - - (6,154) 6,154 - Dividends proposed - - - - - (34,093) (46,553) (44,356) (158,314) (283,316) (259,236) (542,552)
Share based compensations - - 11,279 - - - - - - 11,279 - 11,279
Total contributions by and distributions to owners
of the Parent 190,494 - 5,125 - 33,329 250,354 (46,553) (130,857) (580,083) (278,191) (253,082) (531,273)
Transactions with shareholders
Acquisition cost of the preferred shares of subsidiaries - - (493) - - - - - - (493) 2,430 1,937
Total transactions with shareholders - - (493) - - - - - (493) 2,430 1,937
At December 31, 2015 (restated) 3,822,725 (58,694) 955,326 (184,691) 284,960 2,731,745 171,021 958,374 - 8,680,766 3,688,488 12,369,254
The accompanying notes are an integral part of these consolidated financial statements.
Cosan S.A Indústria e Comércio
Statements of changes in shareholder’ equity
For the period ended December 31, 2016 and 2015
(In thousands of Brazilian Reais - R$)
13
Profit reserve
Common
stock
Tresuary
share
Other capital
reserve
Others equity
components Legal
Statutary
reserve
Unrealized
earning
Retained
rearning
accumulated
earning Total
Non-controlling
interest Total equity
At January 01, 2016 3,822,725 (58,694) 955,326 (184,691) 284,960 2,731,745 171,021 1,123,796 - 8,846,188 3,688,488 12,534,676
New standards and interpretations
adopted (note 5) - - - - - - - (165,421) - (165,421) - (165,421)
At January 1, 2016 (restated) 3,822,725 (58,694) 955,326 (184,691) 284,960 2,731,745 171,021 958,375 - 8,680,767 3,688,488 12,369,255
Profit for the year - - - - - - - - 1,036,085 1,036,085 354,002 1,390,087
Other comprehensive income: Gain on cash flow hedge in joint
ventures and subsidiary - - - 46,605 - - - - - 46,605 - 46,605
Foreign currency translation differences - - - 72,399 - - - - - 72,399 - 72,399 Actuarial loss on defined benefit plan - - - (36,140) - - - - - (36,140) (20,493) (56,633)
Gain in mensuration financial instrument
derivative - - - 6,000 - - - - - 6,000 - 6,000
Fair value of of investment
property - - - (190,735) - - - 190,735 - - - -
Fair value of financial assets - - - (9,296) - - - 9,296 - - - - Changes in fair value of available for
available for sale securities - - - (65) - - - - - (65) - (65)
Total comprehensive income
for the year - - - (111,232) - - - 200,031 1,036,085 1,124,884 333,509 1,458,393
Contributions and distributions for shareholders
Increase capital 1,923 - (1,923) - - - - - - - - - Effect of distribution of dividends
to non-controlling - - (12,973) - - - - - - (12,973) 12,973 -
Shaer based exercised - 23,728 9,631 - - - - - - 33,359 - 33,359 Alienação de investimento - - - - - - - - - - (1,622,004) (1,622,004)
Dividends proposed - - - - - (414,298) - (62,390) (390,000) (866,688) (563,371) (1,430,059)
Staturory reserve - - - - - 646,085 - - (646,085) - - - Share based compensations - - 8,369 - - - - - - 8,369 - 8,369
Total contributions by and distributions to
owners of the Parent 1,923 23,728 3,104 - - 231,787 - (62,390) (1,036,085) (837,933) (2,172,402) (3,010,335)
Transactions with shareholders
Shareholding change in subsidiary - - (2,112) - - - - - - (2,112) (22,862) (24,974)
Total transactions with shareholders - - (2,112) - - - - - - (2,112) (22,862) (24,974)
At June 30, 2016 3,824,648 (34,966) 956,318 (295,923) 284,960 2,963,532 171,021 1,096,016 - 8,965,606 1,826,733 10,792,339
The accompanying notes are an integral part of these consolidated financial statements.
Cosan S.A Indústria e Comércio
Statement of cash flows For the period ended December 31, 2016 and 2015
(In thousands of Brazilian Reais - R$)
14
Parent Company Consolidated
Note
December
31, 2016
December 31,
2015
(restated)
December 31,
2016
December 31,
2015
(restated)
Cash flows from operating activities
Profit (loss) before taxes 754,717 280,848 1,485,562 695,678
Adjustments for:
Depreciation and amortization 6,542 4,035 615,314 561,041
Equity in earnings of associates 13 (1,875,845) (1,069,414) 12,820 3,185
Equity in earnings of jointly
controlled entity 14 108,162 121,179 (1,570,132) (695,165)
Gain on disposals assets - - 14,824 4,743
Option shares granted 8,369 11,279 8,369 11,279
Provision for judicial demands 66,759 34,189 77,953 42,555
Indexation charges, interest and exchange, net 837,475 767,723 1,581,571 1,343,691
Loss on compensation claims - (297,203) - (297,203)
Other 16,733 (20,566) 111,822 77,077
(77,088) (167,930) 2,338,103 1,746,881
Changes in:
Trade receivables - - (23,904) 76,014
Inventories - - 55,916 (74,479)
Recoverable other taxes (15,212) (54,363) 119,018 (118,735)
Related parties, net (325,264) (225,234) 10,365 (68,059)
Trade payables 1,245 (2,709) (115,234) 504,711
Employee benefits (10,036) (13,004) (57,278) (51,178)
Provision for judicial demands (145) (5,897) (2,010) (12,298)
Payablesother taxes (10,898) (2,428) (41,478) (9,498)
Judicial deposits 889 - 227 -
Discontinued operation - - 70,087 22,844
Post-employment benefits - - (30,262) -
Other assets and liabilities, net 20,944 (18,846) (88,312) (153,020)
(338,477) (322,481) (102,865) 116,302
Net cash (used in) generated by
operating activities (415,565) (490,411) 2,235,238 1,863,183
Cash flows from investing activities
Acquisitions net of cash acquired 13 (223,370) (54,977) (18,698) (29,537)
Acquisition of non-controlling interests (120,367) - (363,807) -
Acquisition of non-controlling interests (54,122) - (54,122) -
Dividends received from investees 1,494,551 534,934 4,036 2,303
Dividends received from jointly controlled entity 80,085 149,177 1,230,367 671,350
Other financial assets (186,052) - (186,052) (66,659)
Acquisition of property, plant and equipment 17 18 (1,910) (3,947) (491,279) (606,741)
Cash received from sale of discontinued operations 1,032,271 118,123 1,053,768 118,362
Related parties 11,338 5,146 11,338 8,282
Discontinued operation - - (13,934) (27,839)
Cash received on sale of fixed assets,
and intangible assets - - - 8,412
Net cash generated by (used in)
investing activities 2,032,424 748,456 1,171,617 77,933
Cosan S.A Indústria e Comércio
Statement of cash flows For the period ended December 31, 2016 and 2015
(In thousands of Brazilian Reais - R$)
15
Parent Company Consolidated
December
31, 2016
December 31,
2015
(restated)
December 31,
2016
December 31,
2015
(restated)
Cash flows from financing activities
Loans, borrowings and debentures raised - 376,880 3,529,668 1,727,308
Payment of principal on loans,
borrowings and debentures (335,170) (376,880) (3,233,588) (1,493,034)
Payment of principal and interest on loans,
borrowings and debentures (11,914) (5,553) (543,091) (537,267)
Capital integralization - - 40,000 -
Related parties - (21,160) - (3,807)
Non-controlling interest subscription 28,764 1,937 28,764 1,937
Derivative financial intruments (129,183) 394,106 (414,538) 550,080
Dividends paid (866,834) (272,330) (1,899,978) (650,367)
Discontinued operation - - (53,272) -
Proceeds from exercise of share options 33,359 - 33,359 -
Net cash used by financing activities (1,280,978) 97,000 (2,512,676) (405,150)
(Decrease) increase in cash and cash
equivalents 335,881 355,045 894,179 1,535,966
Cash and cash equivalents at beginning of year 731,049 376,004 3,129,530 1,540,192
Effect of exchange rate fluctuations on
cash held - - (32,779) 53,372
Cash and cash equivalents at end of year 1,066,930 731,049 3,990,930 3,129,530
Additional information
Income tax paid - - 76,125 89,371
The accompanying notes are an integral part of these financial statements.
Cosan S.A. Indústria e Comércio
Statement of value added For the period ended December 31, 2016 and 2015
(In thousands of Brazilian Reais - R$)
16
Parent Company Consolidated
December 31, 2016 December 31, 2015
(restated) December 31, 2016
December 31, 2015
(restated)
Revenue
Sale of services - - 9,245,524 10,391,555
Other operating revenue 3,640 380,082 357,738 409,704
Allowance for doubtful accounts - - (25,383) (21,055)
3,640 380,082 9,577,879 10,780,204
Raw materials acquired from third parties
Cost of services rendered - - (5,346,336) (6,867,216)
Materials, energy, third party services, others (151,373) (260,396) (596,009) (687,854)
(151,373) (260,396) (5,942,345) (7,555,070)
Gross value added (147,733) 119,686 3,635,534 3,225,134
Retention
Depreciation and amortization (6,542) (4,035) (615,314) (561,041)
(6,542) (4,035) (615,314) (561,041)
Net value added (154,275) 115,651 3,020,220 2,664,093
Value added transferred in
Equity pick-up in investees 1,875,845 1,069,414 (12,820) (3,185)
Equity pick-up in jointly controlled entity (108,162) (121,179) 1,570,132 695,165
Financial income 1,212,990 1,466,283 1,248,970 871,013
Profit from discontinued operations (76,057) 38,915 (35,262) 100,867
2,904,616 2,453,433 2,771,020 1,663,860
Value added to be distributed 2,750,341 2,569,084 5,791,240 4,327,953
Distribution of value added
Personnel 52,418 53,128 387,130 363,227
Taxes and contributions (348,739) (284,775) 1,426,325 1,051,144
Financial expenses and rents 2,010,577 2,220,648 2,587,698 2,031,820
Non-controlling interests - - 354,002 301,679
Dividends proposed 866,688 158,314 866,688 158,314
Profit from discontinued operations 245,454 382,854 204,659 320,902
Profit from continued operations (76,057) 38,915 (35,262) 100,867
2,750,341 2,569,084 5,791,240 4,327,953
The accompanying notes are an integral part of these consolidated financial statements
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
17
1 Operations
Cosan S.A. Indústria e Comércio composed of its subsidiaries and jointly controlled entities
("Company" or "Cosan") is a publicly traded company with its shares traded on the Novo Mercado da
Bolsa de Valores de São Paulo ("BM&FBOVESPA") under the ticker symbol CSAN3, and has its
headquarters in the city of São Paulo, Brazil. Cosan Limited is the controlling shareholder of Cosan, in
which it holds 62.29%.
The primary activities in which Cosan S.A. operates, include the following business segments: (i) Piped
natural gas distribution to part of the State of São Paulo through its subsidiary Companhia de Gás de
São Paulo – COMGÁS (“COMGÁS”); which is consolidated since November 2012, (ii) Production and
distribution of lubricants under the Mobil licensed trademark in Brazil, Bolivia, Uruguay and Paraguay,
in addition to the European and Asian market using the Comma brand and corporate activities; and (iv)
other investments, in addition to the corporate structures of Company (“Cosan’s other business”).
The Company also holds interests in two jointly controlled entities ("Joint Ventures" or "JVs"): (i)
Raízen Combustíveis S.A. (“Raízen Combustíveis”), fuel distribution business, and (ii) Raízen Energia
S.A. (“Raízen Energia”), production and marketing of sugar, ethanol and energy cogeneration, produced
from sugar cane bagasse.
On September 30, 2016 the Company disclosed a material fact stating that it has signed a Share
Purchase Agreement with Mansilla Participações Ltda. (Vehicle TIAA investment fund - Teachers
Insurance and Annuity Association of America), also a shareholder of the company Radar and Radar II.
In the material fact, the Company sold part of its shares of Radar e Radar II, for the amount of R$
1,053,768 received on November 04, 2016. see note 15.
2 Basis of preparation
2.1 Statement of compliance
The individual financial statements have been prepared and presented in accordance with the accounting
policies adopted in Brazil. From 2014 IFRS started to allow the application of the equity method in
subsidiaries in separate financial statements, therefore the individual financial statements also comply
with International Financial Reporting Standards (International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board (IASB))
The consolidated financial statements were prepared and are presented in accordance with accounting
practices adopted in Brazil, which comprise the Brazilian’s Law of Corporations, the Securities and
Exchange Commission (CVM) and the pronouncements of the Accounting Pronouncements Committee
(CPC), that comply with international accounting standards (IFRS) issued by the International
accounting Standards Board (IASB).
The relevant information specific to the financial statements, and only them, are being evidenced and
that correspond to those used by it in its management.
These financial statements were authorized for issue by the Board of Directors on February 16, 2017.
2.2 Functional and presentation currency
There financial statements, individual and consolidated, are presented in Brazilian Real, which is the
Company´s functional currency. The financial statements of each subsidiary included in the
consolidation of the Company and the ones used as the basis for valuation of investments by the equity
method are prepared based on the functional currency of each company.
For subsidiaries located abroad, their assets and liabilities were converted to Real at the year-end
exchange rate and the results were calculated by the average monthly rate during the year. The effects of
conversion are recorded in shareholders equity of these subsidiaries, the main functional currency for
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
18
the subsidiaries located outside Brazil is U.S. Dollar (US$) or the Pound Sterling (GBP).
2.3 Use of estimates and judgments
The preparation of the financial statements in conformity with CPC and IFRS requires management to
make judgments, estimates and assumptions that affect the application of accounting policies and the
reported amounts of assets, liabilities, revenue and expenses at the end of the reporting period. Actual
results may differ from these estimates
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised and in any future periods
affected. Information about critical judgments in applying accounting policies that have the most
significant effect on the amounts recognized in the financial statements is included in the following
notes:
Note 17 e 18 - Property, plant and equipment and intangible assets
The Company annually performs a review of impairment indicators for intangible assets and property,
plant and equipment. Also, an impairment test is undertaken for goodwill and intangible assets with
indefinite useful lives. Impairment exists when the carrying value of an asset or cash generating unit
exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in
use. The key assumptions used to determine the recoverable amount of the different cash generating
units to which goodwill is allocated are explained in note 18.
Subsaresidiaries has an agreement for the public concession of gas distribution service, in accordance to
which the Conceding Authority, at the end of the concession, will hold a significant portion of the
infrastructure and controls what services must be rendered and what prices will be applied. This
concession agreement represents the right to charge from customers for the supply of gas during the
effective period of the agreement. Therefore, the Company recognizes this right as an intangible asset.
Thus, the infrastructure construction necessary for gas distribution is considered a service to the Grantor
and the related revenue is recognized at fair value. Financing costs directly related to construction are
also capitalized.
The Company does not recognize a margin on the infrastructure construction, since such margin is
mainly linked to the services contracted from third-parties at amounts which reflect the fair value.
Subject to approval of the Granting Authority, the Company may request only once the extension of the
distribution services for another 20 years. When the concession is terminated, the assets linked to the
rendering of gas distribution services will be returned to the Granting Authority, and the Company will
be entitled to receive an indemnity to be determined based on assessments and evaluations considering
the book values to be calculated at the time. Currently the figures for compensation are not
predetermined or determinable, which is why the Company did not apply the bifurcated model for the
accounting of financial assets.
The amortization of intangible assets reflects the pattern expected for the utilization of the future
economic benefits by the Company, which corresponds to the useful lives of the assets comprising the
infrastructure consonant to the São Paulo State Sanitation and Energy Regulatory Agency (“ARSESP”)
provisions, as disclosed in Note 18.
The amortization of the intangible assets is discontinued when the related asset is fully used or written-
off, and no longer is included in the calculation basis of the tariff for the rendering of the concession
services, whichever occurs first.
Note 23 - Income taxes and social contribution
A deferred tax asset is recognized for loss carry forwards to the extent that it is probable that future
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
19
taxable income will be generated to realize such losses. Significant judgment is required to determine
the amount of deferred tax assets that can be recognized, based upon the timing and the level of future
taxable income together with future tax planning strategies.
Other non-current asset
The Company is active part in lawsuits filed against the Federal Government, claiming appropriate
compensation arising from the differences in sugar and ethanol prices. A compensation action is
recognized when it appeared certain that will be an inflow of economic benefits.
Note 32 - Fair value of derivatives and other financial instruments
When the fair value of financial assets and liabilities cannot be derived from active markets, their fair
value is determined using valuation techniques including the discounted cash flow model. The inputs to
these models are taken from observable markets where possible, but when this is not feasible, a degree
of judgment is required in determining fair values. Judgment is required in the determination of inputs
such as liquidity risk, credit risk and volatility. Changes in these variables could affect the reported fair
value of financial instruments.
Note 33 - Post-employment benefit
The cost of defined benefit pension plans and other post-employment and the present value of the
pension obligation is determined using actuarial valuations. An actuarial valuation involves the use of
various assumptions which may differ from actual results in the future. These include the determination
of the discount rate, future salary increases, mortality rates and future pension increases. A defined
benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed by
management at each reporting date.
Note 34 - Share-based payment
The Company measures employees’ share based compensation cost by reference to the fair value of the
shares at the grant date. The estimation of fair value for share-based payment transactions requires
determining the most appropriate valuation model, which is dependent on the terms and conditions of
the plan. This estimate also requires determining the most appropriate inputs to the valuation model
including the assumption of the expected life of the stock option, volatility and dividend yield. The
assumptions and models used for estimating fair value for share-based payment transactions are
disclosed in Note 34.
Note 24 - Provisions for legal proceedings
Provisions for legal proceedings are recognized when: the Company has a present legal or constructive
obligation as a result of past events; it is probable that an outflow of resources will be required to settle
the obligation; and the amount has been reliably estimated.
The assessment of probability loss includes the available evidence, hierarchy of laws, jurisprudence, the
most recent court decisions and relevance in the legal system, as well as the opinion of outside counsel.
Provisions are reviewed and adjusted according to circumstances, such as limitation period, conclusions
of tax inspections or additional exposures identified based on new matters or court decisions.
Provisions for legal proceedings resulting from business combinations are estimated at fair value at the
acquisition date.
Note 14 - Investment in joint ventures
The Company has a 50% interest in a joint agreement. The joint venture agreements require unanimous
consent from all parties for all relevant activities.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
20
The two partners have direct rights to the assets of the partnership and are jointly and severally liable
for the liabilities incurred by the partnership. This entity is therefore classified as a joint ventures and
the Company recognizes its interest in the joint ventures using the equity method. In addition, under the
contractual agreements, the Company and the parties to the agreement are entitled to the net assets of
the company. For this reason, this agreement is classified as a joint venture.
Measurement of fair values
A number of the Company’s accounting policies and disclosures require the measurement of fair values,
for both financial and non-financial assets and liabilities.
The Company regularly reviews significant unobservable inputs and valuation adjustments. If third
party information, such as broker quotes or pricing services, is used to measure fair values, then the
valuation team assesses the evidence obtained from the third parties to support the conclusion that such
valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such
valuations should be classified.
When measuring the fair value of an asset or a liability, the Company uses observable market data when
available. Fair values are categorized into different levels in a fair value hierarchy based on the inputs
used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting
period during which the change has occurred.
2.4 Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the
following material items in the consolidated statement of financial position:
Derivative financial instruments are measured at fair value;
Derivative financial instruments at fair value through profit or loss;
Loans measured at fair value through profits or loss; and
Employees’ defined benefit obligations are presented at the present value of the actuarial obligation,
plus the cost of past service not recognized and net of the fair value of plan assets as explained in Note
33.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
21
3 Significant accounting policies
The accounting policies set out below have been applied consistently by the Company to all periods
presented in this consolidated financial statements.
3.1 Basis of consolidation
The consolidated interim financial statements include the accounts of Cosan and its subsidiaries. Cosan’s
subsidiaries are listed below:
Direct and indirect interest
December 31,
2016
December 31,
2015
Directly owned subsaresidiaries
_Águas da Ponte Alta S.A. (i)
- 65.00%
_Bioinvestments Negócios e Participações S.A. (i)
- 65.00%
_Comma Oil Chemicals 100.00% 100.00%
_Companhia de Gás de São Paulo - COMGÁS (ii)
62.66% 61.33%
_Cosan Biomassa S.A. (iii)
100.00% 100.00%
_Cosan Cayman II Limited 100.00% 100.00%
_Cosan Global Limited 100.00% 100.00%
_Cosan Investimentos e Participações S.A. 100.00% 100.00%
_Cosan Lubes Investments Limited 100.00% 100.00%
_Cosan Lubrificantes e Especialidades S.A. 100.00% 100.00%
_Cosan Luxembourg S.A. 100.00% 100.00%
_Cosan Overseas Limited 100.00% 100.00%
_Cosan Paraguay S.A. 100.00% 100.00%
_Cosan US, Inc. 100.00% 100.00%
_Ilha Terminal Distribuição de Produto Químicos 100.00%
100.00%
_Nova Agrícola Ponte Alta S.A. (i)
-
29.50%
_Nova Amaralina S.A. Propriedades Agrícolas (i)
- 29.50%
_Nova Santa Barbara Agrícola S.A. (i)
- 29.50%
_Pasadena Empreendimentos e Participações S.A. 100.00% 100.00%
_Proud Participações S.A. (i)
- 65.00%
_Radar II Propriedades Agrícolas S.A. (i)
2.51% 65.00%
_Radar Propriedades Agrícolas S.A. (i)
3.00% 29.50%
_Terras da Ponte Alta S.A. (i)
- 29.50%
_Vale da Ponte Alta S.A. (i)
- 65.00%
Zip Lube S.A. 100.00% 100.00%
i. On October 31, 2016, the Company sold the control of Radar to Mansilla Participações Ltda. (Vehicle of
TIAA - Teachers Insurance and Annuity Association of America), according to note 15. Mansilla now holds
100% of the preferred shares, reducing Cosan's economic participation to 3%, without affecting the
significant influence, Justifying the criteria to define the measurement of the retained portion of the
investment using the equity method, in accordance with IAS 28, although it does not consolidate due to the
shareholders' agreement that inhibits its decision-making.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
22
ii. As of December 31, 2016, the Company increased its interest to 62.66% in Comgás due to the purchase of
1,327,800 common shares held by non-controlling shareholders and the sale of 143,500 preferred shares.
iii. The Company recognized, in line with obligations to non-controlling shareholder, commitment (put option),
to repuchase shares of non-controlling shareholders as determined in a shareholders’ agreement.
(a) Non-controlling interests
For each business combination, the Company elects to measure any non-controlling interests in the acquiree
either:
At fair value; or
At their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity
transactions – that is, as transactions with the owners in their capacity as owners.
(b) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Company has control. Subsidiaries
are fully consolidated from the date on which control is transferred to the Company. It is deconsolidated
from the date that the Company ceases to have control.
The accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Company.
(c) Investments in associates (equity method investees)
Associates are those entities in which the Company has significant influence, but not control or joint
control, over the financial and operating policies.
Investments in associates are accounted for under the equity method and are recognized initially at cost. The
cost of the investment includes transaction costs.
Under the equity method of accounting, the share attributable to the Company of the profit or loss for the
period of such investments is accounted for in the statement of profit or loss, in “Equity in associates”.
Unrealized gains and losses arising on transactions between the Company and the investees are eliminated
based on the percentage interest held in such investees. The other comprehensive income of subsidiaries,
associates and jointly controlled entities is recorded directly in the Company’s shareholders’ equity, in
“Other comprehensive income”.
(d) Investments in joint ventures
The Company has interests in joint ventures, in which contractual arrangement establishes joint control over
the voting and economic activities of the entity. The contractual arrangements require unanimous agreement
for financial and operating decisions among the ventures. The Company recognizes its interest in the joint
ventures using the equity method (Note 14).
(e) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
23
Unrealized gains arising from transactions with equity accounted investees are eliminated against the
investment to the extent of the Company’s interest in the investee. Unrealized losses are similarly
eliminated, but only to the extent that there is no evidence of impairment.
3.2 Foreign currency
(a) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the each
subsidiary using the exchange rates at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are translated to the functional currency using the
exchange rate at the reporting date.
(b) Foreign operations
The assets and liabilities derived from foreign operations, including goodwill and fair value adjustments
arising on acquisition, are translated to Brazilian Reais using the exchange rates at the reporting date.
Income and expenses of foreign operations are translated to Brazilian Reais using the exchange rates at the
dates of the transactions.
Foreign currency differences are recognized in other comprehensive income, and are presented in
shareholders' equity. However, if the subsidiary is not a wholly-owned subsidiary, then the proportional part
of the conversion difference is attributed to the non-controlling shareholders. When a foreign operation
(controlled, associated or jointly controlled entity) is disposed of, the amount recorded in the cumulative
translation adjustment account is transferred to profit or loss as part of the disposal result.
(c) Translation of subsidiaries and associates’ financial statements
These consolidated financial statements have been translated to the Brazilian Real using the following
criteria:
assets and liabilities have been translated using the exchange rate at the balance sheet date;
statement of profit or loss, comprehensive income and statement of cash flows have been translated using
the monthly average exchange rate; and
shareholders' equity has been translated using the historical exchange rate.
Translation effects have been recognized in shareholders' equity in "Cumulative translation adjustment".
The financial statements of each subsidiary included in these consolidated financial statements and
investments under the equity method were prepared based on the respective functional currency. For the
subsidiaries whose functional currency is different from the Real, the assets and liabilities accounts are
translated into the Company's reporting currency using the exchange rates in force at the balance sheet date,
and the revenues and expenses are converted by the rates Average exchange rates for the period.
The exchange rate of the Brazilian Real (R$) to the U.S. Dollar (US$) was R$ 3.2591 = US$ 1.00 at
December 31, 2016, R$ 3.9048 = US$ 1.00 at December 31, 2015.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
24
3.3 Financial instruments
(a) Non-derivative financial assets
The Company initially recognizes loans and receivables on the date that they are originated. All other
financial assets (including assets designated as at fair value through profit or loss) are recognized initially
on the trade date, which is the date that the Company becomes a party to the contractual provisions of the
instrument.
The Company classifies non-derivative financial assets into the following categories: financial assets at fair
value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale
financial assets.
(i) Financial assets at fair value through profit or loss
A financial asset is classified at fair value through profit or loss if it is classified as held-for trading or is
designated as such on initial recognition. Financial assets are designated at fair value through profit or loss
if the Company manages such investments and makes purchase and sale decisions based on their fair value
in accordance with the Company’s documented risk management or investment strategy. Attributable
transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or
loss are measured at fair value and changes therein, which takes into account any dividend income, are
recognized in profit or loss.
Financial assets classified as held-for-trading comprise short-term sovereign debt securities actively
managed by the Company’s treasury department to address short-term liquidity needs.
Financial assets designated at fair value through profit or loss comprise equity securities that otherwise
would have been classified as available-for-sale.
(ii) Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an
active market. Such assets are recognized initially at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the
effective interest method, less any impairment losses.
Loans and receivables comprise cash and cash equivalents, restricted cash, trade and other receivables.
(iii) Restricted cash
Restricted cash comprises investments that are linked to the Company's loan and escrow for security
agreement.
(iv) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits and highly liquid short-term investments
with maturities of three months or less from the acquisition date that are subject to an insignificant risk of
changes in their fair value, and are used by the Company in the management of its short-term commitments.
(v) Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-
sale or are not classified in any of the above categories of financial assets. Available-for-sale financial assets
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
25
are recognized initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, the financial assets are measured at fair value and changes therein, other
than impairment losses and foreign currency gain/losses on available-for-sale debt instruments, are
recognized in other comprehensive income and presented in the consolidated statements of changes in
equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit
or loss.
Available-for-sale financial assets comprise equity securities and debt securities.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is derecognized 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 it has neither transferred nor retained substantially all of the risks and rewards of the asset nor
transferred control of it, the asset is recognized to the extent of the Company’s 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.
In this case, the Company also recognizes an associated liability. The transferred asset and the associated
liability are measured based on the rights and obligations that the Company maintained.
(b) Non-derivative financial liabilities
The Company initially recognizes debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities (including liabilities designated at fair value recorded in profit or
loss) are recognized initially on the trade date, which is the date that the Company becomes a party to the
contractual provisions of the instrument.
The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or
expire.
The Company classifies non-derivative financial liabilities as other financial liabilities. Such financial
liabilities are initially recognized at fair value less any directly attributable transaction costs. Subsequent to
initial recognition, these financial liabilities are measured at amortized cost using the effective interest
method.
Financial liabilities comprise loans and borrowings, debt securities issued, bank overdrafts, and trade and
other payables.
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
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
26
terms, or the terms of an existing liability are substantially modified, such an exchange or modification is
treated as a 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 profit or loss.
(c) Share capital
Ordinary shares
Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from
equity. Income taxes relating to transaction costs of an equity transaction are accounted for in accordance
with IAS 12.
Preference shares
Non-redeemable preference shares are classified as equity, because they bear discretionary dividends, do
not contain any obligations to deliver cash or other financial assets and do not require settlement in a
variable number of the Company’s equity instruments. Discretionary dividends thereon are recognized as
equity distributions on approval by the Company’s shareholders.
Mandatory minimum dividends as defined in the bylaws are recognized as liabilities.
(d) Derivative financial instruments, including hedge accounting
The Company holds derivative financial instruments to hedge its foreign currency and interest rate risk
exposures. Embedded derivatives are separated from the host contract and accounted for separately if:
(i) The economic characteristics and risks of the host contract and the embedded derivative are not closely
related;
(ii) A separate instrument with the same terms as the embedded derivative would meet the definition of a
derivative; and
(iii) The combined instrument is not measured at fair value through profit or loss.
On initial designation of the derivative as a hedging instrument, the Company formally documents the
relationship between the hedging instrument and hedged item, including the risk management objectives
and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be
used to assess the effectiveness of the hedging relationship. The Company makes an assessment, both at the
inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are
expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective
hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range
of 80% – 125%. For a cash flow hedge of a forecast transaction, the transaction should be highly probable
to occur and should present an exposure to variations in cash flows that ultimately could affect reported
profit or loss.
Derivatives are initially recognized at fair value; any attributable transaction costs are recognized in profit
or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes
therein are accounted for as described below:
(i) Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows
attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
27
transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative
is recognized in other comprehensive income and presented in the hedging reserve in equity. Any
ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.
For the year ended December 31, 2016, the impact is R $ 443.
When the hedged item is a non-financial asset, the amount accumulated in equity is retained in other
comprehensive income and reclassified to profit or loss in the same period or periods during which the non-
financial item affects profit or loss. If the hedging instrument no longer meets the criteria for hedge
accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting
is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in
equity is reclassified to profit or loss.
(ii) Fair value hedge
Changes in fair value of derivatives, that are designated and qualify as fair value hedge, are recorded in the
statement of profit or loss, with any changes in fair value of the hedged asset or liability that are attributable
to the hedged risk. The Company applies hedge accounting for fair value hedges to protect itself against the
risk of changes in interest rates and foreign exchange rates on loans. The gain or loss related to the effective
portion of interest rate swaps to protect against fixed rate borrowings is recognized in the statement of profit
and loss as "Financial expenses". The gain or loss related to the ineffective portion is recognized in the
statement of profit or loss as "Other gains (losses), net". Changes in fair value of fixed rate borrowings
hedged attributable to interest rate risk are recognized in the statement of profit or loss as "Financial
expenses".
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a
hedged item for which the method of effective interest rate is used, is amortized to income over the period
to maturity.
(iii) Embedded derivatives
Changes in the fair value of separated embedded derivatives are recognized immediately in profit or loss.
(iv) Other derivative financial instruments
When a derivative financial instrument is not designated in a hedge relationship and does not qualify for
hedge accounting, all changes in its fair value are recognized immediately in profit or loss.
3.4 Inventory
Inventory is recorded at the lower of average cost of acquisition or production and net realizable value.
Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable
selling expenses.
Provisions for slow-moving or obsolete inventory are recorded when deemed necessary by management.
The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and
related production overheads (based on normal operating capacity), excluding borrowing costs.
3.5 Property, plant and equipment
(a) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and any
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
28
accumulated impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of
constructed assets includes:
(i) The cost of materials and direct labor;
(ii) Any other costs directly attributable to bringing the assets to a working condition for their intended use;
(iii) An estimate of the costs of dismantling and removing the items and restoring the site on which they are
located, and
(iv) Capitalized borrowing costs;
Cost also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign
currency purchases of property, plant and equipment. Purchased software that is integral to the functionality
of the related equipment is capitalized as part of that equipment.
When componets of an item of property, plant and equipment have different useful lives, they are accounted
for as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment, calculated as the difference
between the net proceeds from disposal and the carrying amount of the item, is recognized in profit or loss.
(b) Subsequents costs
Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated
with the expenditure will flow to the Company. Ongoing repairs and maintenance are expensed as incurred.
(c) Depreciation
Items of property, plant and equipment are depreciated from the date they are available for use or, in respect
of constructed assets, from the date that the asset is completed and ready for use.
Depreciation is calculated on the carrying value of property, plant and equipment less their estimated
residual values using the straight-line basis over their estimated useful lives. Depreciation is generally
recognized in profit or loss, unless it is capitalized as part of the cost of another asset. Assets recognized
under finance leases are depreciated over the shorter of the lease term and their useful lives unless it is
reasonably certain that the Company will obtain ownership by the end of the lease term. Land is not
depreciated.
Depreciation is calculated using the straight-line method on the useful lives of the assets, in accordance with
the annual depreciation rates shown below:
Buildings and Improvements 4%
Machinery, Equipment and Facilities 10%
Airplanes, Vessels and Vehicles 10% a 20%
Furniture and Fixtures 10%
Computer Equipment 20%
Costs of normal periodic maintenance are recorded as expenses when incurred since the components will
not improve the production capacity or introduce improvements to the equipment.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
29
Depreciation methods, useful lives and residual values are revised at each reporting date and adjusted if
appropriate.
3.6 Intangíveis e ágio
(i) Goodwill
Goodwill is measured at cost less accumulated impairment losses. With respect to equity method investees,
the carrying amount of goodwill is included in the carrying amount of the investment, and any impairment
loss is allocated to the carrying amount of the equity method investee as a whole.
(ii) Other intangible assets
Other intangible assets that are acquired by the Company and have a finite life are measured at cost less
accumulated amortization and any accumulated impairment losses.
(iii) Subsequent expenditure
Subsequent expenditures are capitalized only when it increases the future economic benefits embodied in
the specific asset to which it relates. All other expenditures are recognized in profit or loss as incurred.
(iv) Amortization
Except for goodwill, intangible assets are amortized on a straight-line basis over their estimated useful lives,
from the date that they are available for use or acquired.
Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
(v) Contracts with customers
Costs incurred on the development of gas system for new clients (including pipelines, valves, and general
equipment) are recognized as intangible assets and amortized over the contract period.
(a) Intangible assets related to the concession rights agreement
The Company has a public concession agreement for a gas distribution service in which the Concession
Authority controls what services will be provided and the price, as well it holds a significant participation in
the infrastructure at the end of the concession. This concession agreement represents the right to charge
users for gas supply during the term of the agreement. Accordingly, the Company recognizes this right as an
intangible asset
The intangible asset comprises: (i) the concession right recognized upon the business combination of
COMGÁS, which is being amortized over the concession period on a straight line basis, considering the
extension of the distribution services for another 20 years; and (ii) Acquired or constructed assets of the
concession, which comprises the necessary infrastructure for the distribution of natural gas, and are
amortized and depreciated reflecting the pattern in which the future economic benefits of the asset are
expected to be consumed by the Company, which correspond to the useful life of the assets. Active
infrastructure components in line with the provisions of the ARSESP.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
30
The concession agreement was signed on May 31, 1999 with an initial term of 30 years. Subject to approval
of the Conceding Authority, the Company may request only once the extension of the distribution services
for another 20 years. When the concession is terminated, the assets linked to the rendering of gas
distribution services will be returned to the Conceding Authority, and the Company will be entitled to
receive an indemnity to be determined based on assessments and evaluations considering the book values to
be calculated at the time.
The concession contract determines that the tariff charged by COMGÁS be reviewed annually, in May, with
the aim to realign the tariff charged to consumers to the cost of the gas and adjust for inflation.
Once the concession is terminated, the Company has the right to request the reversion to the Granting
Authority of the assets and facilities linked to the gas distribution service. Currently, the amounts related to
indemnification are not pre-established or determinable, that’s why the Company did not apply the
bifurcated model for the accounting of the financial asset.
3.7 Impairment
(a) Non-derivative financial assets
A financial asset not classified as at fair value through profit or loss, including an interest in an equity-
accounted investee, is assessed at each reporting date to determine whether there is objective evidence that
it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or
more events that occurred after the initial recognition of the asset, and that loss event(s) had an impact on
the estimated future cash flows of that asset that can be estimated reliably.
(b) Available-for-sale financial assets
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the
asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance
account against loans and receivables or held-to-maturity investment securities. Interest on the impaired
asset continues to be recognized. If, in a subsequent period, the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognized (such as an
improvement in the debtor’s credit rating), the reversal of the previously recognized impairment loss is
recognized in the statement of profit or loss.
(c) Non-financial assets
The carrying amounts of the Company’s non-financial assets, except investment property, inventories and
deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is
tested annually for impairment. An impairment loss is recognized if the carrying amount of an asset or cash-
generating unit (“CGU”) exceeds its recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset or CGU. For impairment testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely independent of the cash inflows of
other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been
allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level
at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business
combination is allocated to Companies of CGUs that are expected to benefit from the synergies of the
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
31
combination.
Impairment losses are recognized in profit or loss. Impairment losses recognized for CGUs are allocated
first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to
reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.
An impairment loss with respect to goodwill is not reversed. For other assets, an impairment loss is reversed
only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortization, if no impairment loss had been recognized.
3.8 Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash flows at
a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to
the liability. The unwinding of the discount is recognized as finance cost.
3.9 Employee benefits
(a) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed when the
related service is provided. A liability is recognized for the amount expected to be paid under short-term
cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay these
amounts as a result of past services provided by the employee, and the obligation can be estimated reliably.
(b) Share-based payment transactions
The grant-date fair value of share-based payment awards granted to employees is recognized as an
employee compensation expense, with a corresponding increase in equity, over the period that the
employees become unconditionally entitled to the awards. The amount recognized as an expense is adjusted
to reflect the number of awards for which the related service and non-market performance conditions are
expected to be met, such that the amount ultimately recognized as an expense is based on the number of
awards that meet the related service and non-market performance conditions at the vesting date. For share-
based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is
measured to reflect such conditions and there is no true-up for differences between expected and actual
outcomes.
(c) Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into a separate entity and has no legal or constructive obligation to pay further amounts.
Obligations for contributions to defined contribution plans are recognized as an employee benefit expense
in profit or loss in the periods during which related services are rendered by employees. Prepaid
contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is
available. Contributions to a defined contribution plan that are due more than 12 months after the end of the
period in which the employees render the service are discounted to their present value.
(d) Defined benefit plans
The Company sponsors a Private Pension Company whose purpose is to maintain a plan for the
supplementation of benefits for part of its employees.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
32
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.
The liability recognized in the balance sheet in relation to the defined benefit pension plans is the present
value of the defined benefit obligation at the balance sheet date less the fair value of the plan assets. The
present value of the defined benefit obligation is determined by discounting estimated future cash outflows
using interest rates consistent with market yields, which are denominated in the currency in which the
benefits will be paid and which have close maturities Of the respective pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are
recorded directly in shareholders' equity, as other comprehensive income, when they occur.
Past service costs are recognized in profit or loss.
(e) Other long-term employee benefit
The Company’s net obligation in respect of long-term employee benefits other than pension plans is the
amount of future benefit that employees have earned in return for their service in the current and prior
periods. That benefit is discounted to determine its present value, and the fair value of any related assets is
deducted. The discount rate is the yield at the reporting date of the financial statements for the high credit
quality bonds, and maturity dates approximating the terms of the Company’s obligations and that are
denominated in the currency in which the benefits are expected to be paid. The calculation is performed
using the projected unit credit method. Any actuarial gains and losses are recognized in profit or loss in the
period in which they arise.
3.10 Revenue
(a) Sales of goods
Revenue from the sale of goods, in the ordinary course of business, is measured at the fair value of the
consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is
recognized when significant risks and rewards of ownership have been transferred to the customer, recovery
of the consideration is probable, the associated costs and possible return of goods can be estimated reliably,
there is no continuing management involvement with the goods, and the amount of revenue can be
measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably,
then the discount is recognized as a reduction of revenue as the sales are recognized.
(b) Services rendered
Revenues from services are recognized when the amount of revenue can be measured reliably, when it is
probable that the economic benefits associated with the transaction will flow to the Company, when the
stage of completion of the transaction at the end of the reporting period can be measured reliably, as well as
when its amount and related costs can be measured reliably. Service prices are established based on service
orders or contracts. Services for which payment is made in advance are recorded as deferred revenue in
other liabilities and recognized in revenue when the services are rendered.
The Company revenue recognizes revenue as follows:
(i) Billed revenue
Revenue from gas distribution services is recognized when its amount can be reliably measured, and is
recognized in profit or loss when the volumes are delivered to customers.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
33
(ii) Unbilled revenue
Unbilled gas refers to the portion of gas supplied for which metering and billing to customers have not yet
occurred. This amount is estimated based on the period between measurement and the last day of the month.
The actual volume billed may be different from estimates. The Company believes that, based on its
historical experience, the unbilled estimated amount will not significantly differ from actual amounts.
(iii) Concession construction revenue
The construction of the infrastructure necessary for gas distribution is considered a construction service
rendered to the Conceding Authority, and the related income is recognized in profit or loss at finishing stage
of the work.
Construction costs are recognized by reference to the stage of completion of the construction activity at the
end of the reporting period, and are included in cost of sales.
3.11 Government grants
Government grants are recognized where there is reasonable assurance that the grant will be received and all
attached conditions will be complied with. The Company has a grant related to an expense item, it is
recognized as income on a systematic basis over the periods that the costs, which it is intended to
compensate.
The Company has a fiscal incentive whose benefit includes a reduction of 75% on income tax based on
operation profit beginning in 2008 until 2024.
3.12 Leases
The characterization of a lease as a lease is based on substantive aspects related to the use of a specific asset
or assets or, also, the right to use a certain asset, at the date of its execution.
(a) Leased assets
Leases of property, plant and equipment that transfer to the Company substantially all of the risks and
rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount
equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to
initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that
asset.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty
that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the
shorter of the estimated useful life of the asset and the lease term.
Assets held under other leases are classified as operating leases and are not recognized in the Company’s
statement of financial position.
(b) Lease payments
Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term
of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the
term of the lease.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
34
Minimum lease payments made under finance leases are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense is allocated to each period during the lease term
so as to produce a constant periodic rate of interest on the remaining balance of the liability.
The amounts paid in advance by the Company are recorded as assets and allocated in income linearly during
the term of the contract. The expenses incurred during the grace period are recorded in income and
maintained as payables, being written off in proportion to the payment of current installments.
3.13 Finance income and finance expense
Finance income comprises interest income on funds invested (including available-for-sale financial assets),
dividend income, gains on the disposal of available-for-sale financial assets, fair value gains on financial
assets at fair value through profit or loss, gains on the remeasurement to fair value of any pre-existing
interest in an acquiree in a business combination, gains on hedging instruments that are recognized in profit
or loss and reclassifications of net gains previously recognized in other comprehensive income. Interest
income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is
recognized in profit or loss on the date that the Company’s right to receive payment is established, which in
the case of quoted securities is normally the ex-dividend date.
Finance expense comprise interest expense on borrowings, discount adjustments to present value on
provisions and deferred consideration, losses on disposal of available-for-sale financial assets, dividends on
preference shares classified as liabilities, fair value losses on financial assets at fair value through profit or
loss and contingent consideration, impairment losses recognized on financial assets (other than trade
receivables), losses on hedging instruments that are recognized in profit or loss and reclassifications of net
losses previously recognized in other comprehensive income.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a
qualifying asset are recognized in profit or loss using the effective interest method.
Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as
either finance income or finance cost depending on whether the net foreign currency fluctuations result in a
gain or loss position.
3.14 Taxes
Income taxes are comprised of income tax and social contribution at a combined rate of 34%. Tax expense
comprises current and deferred tax. Current tax and deferred tax is recognized in profit or loss except to the
extent that it relates to a business combination, or items recognized directly in equity or in other
comprehensive income.
Certain subsidiaries measure income tax and social contribution due under the Brazilian presumed profits
regime. The presumed profit came up from a percentage of 32% of operating revenues. Under the
aforementioned regime the applicable tax rate is for income tax is 15% over the presumed profit, plus an
additional 10% when operating revenues exceed of R$ 240, and 9% over the presumed profit for social
contribution.
(a) Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of
previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
35
(b) Deferred tax
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes and tax loss. Deferred
tax is not recognized for:
(i) temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss;
(ii) temporary differences related to investments in subsidiaries, associates and joint ventures to the extent that
the Company is able to control the timing of the reversal of the temporary differences and it is probable that
they will not reverse in the foreseeable future; and
(iii) taxable temporary differences arising on the initial recognition of goodwill.
The measurement of deferred tax reflects the manner in which the Company expects, at the end of the
reporting period, to recover or settle the carrying amount of its assets and liabilities. For investment
property that is measured at fair value, the presumption that the carrying amount of the investment property
will be recovered through sale has not been rebutted.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they
reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or
on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax
assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized for loss carryforwards, tax credits and deductible temporary differences
to the extent that it is probable that future taxable income will be generated in the future. Deferred tax assets
are reviewed at each reporting date and written off to the extent that it is no longer probable that the related
tax benefit will be realized.
(c) Sales taxes
Net revenue is recognized net of discounts and sales taxes.
(d) Tax exposures
In determining the amount of current and deferred tax, the Company takes into account the impact of
uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on
estimates and assumptions and may involve a series of judgments about future events. New information
may become available that causes the Company to change its judgment regarding the adequacy of existing
tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination
is made.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
36
4 New standards and interpretations not yet adopted
A number of new standards and amendments to standards are effective for annual periods beginning after 1
January 2017 and earlier application is permitted; however, the Group has not early adopted the following
new or amended standards in preparing these consolidated financial statements.
Disclosure Initiative (Amendments to IAS 7)
The amendments require disclosures that enable users of financial statements to evaluate changes in
liabilities arising from financing activities, including both changes arising from cash flow and non-cash
changes.
The amendments are effective for annual periods beginning on or after 1 January 2017, with early adoption
permitted.
To satisfy the new disclosure requirements, the Company intends to present a reconciliation between
the opening and closing balances for liabilities with changes arising from financing activities.
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)
The amendments clarify the accounting for deferred tax assets for unrealised losses on debt instruments
measured at fair value.
The amendments are effective for annual periods beginning on or after 1 January 2017, With early adoption
permitted only for financial statements in accordance with IFRS.
The Company is assessing the potential impact on its consolidated financial statements resulting
from the amendments. So far, the Company does not expect any significant impact.
IFRS 15 - Revenue from Contracts with Customers
Introduces a comprehensive framework to determine if and when a revenue should be recognized, and how
revenue is measured. IFRS 15 replaces current revenue recognition standards, including IAS 8 - Revenue,
IAS 11 - Construction Contracts and IFRIC 13 - Customer Loyalty Programs.
IFRS 15 is effective for annual periods beginning on or after January 1, 2018. Early adoption is permitted
only for financial statements in accordance with IFRSs.
The Company is evaluating the potential impact of adopting IFRS 15 in its financial statements.
i. Product Revenue: Revenues are currently recognized when goods are delivered at the customer's location,
considered as the time the customer accepts the goods and the risks and benefits related to the property are
transferred. Revenue is recognized at this time as long as revenue and costs can be measured reliably,
receipt of the consideration is probable and there is no continuous involvement of management with the
products. Thus, we have not identified in the Company and its subsidiaries, until the moment, material
adjustments in the recognition of this recipe.
ii. Service Revenue: When applying the criteria of IFRS 15 for the recognition of revenues over time,
revenue can be recognized later in individual cases in COMGÁS, which currently uses the percentage
completion method in accordance with IAS 11.
The Company will adopt IFRS 15 in its financial statements for the year ended December 31, 2018 and
intends to use the retrospective approach. As a result, the Company will apply all the requirements of IFRS
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
37
15 for each comparative period presented adjusting the previously presented financial statements.
The Company plans to use the practical files for completed contracts. This means that completed contracts
that have commenced and ended in the same comparative presentation period, as well as contracts that are
contracts concluded at the beginning of the earliest period presented, will not be resubmitted.
The Company is currently conducting a detailed impact assessment resulting from the application of IFRS
15 and expects to disclose additional quantitative information prior to the adoption of the standard.
IFRS 9 - Financial instruments
IFRS 9 replaces the guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9
includes new models for classification and measurement of financial instruments and the measurement of
expected credit losses for financial and contractual assets, as well as new requirements on hedge accounting.
The new standard retains the existing guidance on the recognition and derecognition of financial
instruments in IAS 39.
IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted
only for financial statements in accordance with IFRSs.
The effective impact of adopting IFRS 9 in the Company's financial statements in 2018 can not be estimated
with confidence, as it will depend on the financial instruments held by the Company and the economic
conditions in 2018, as well as on accounting decisions and judgments that the Company will make in future.
The new standard will require the Company to review its accounting procedures and internal controls
related to the classification and measurement of financial instruments and these changes are not yet
finalized.
IFRS 9 will require extensive new disclosures, specifically on hedge accounting, credit risk and expected
credit losses. The Company's preliminary assessment included an analysis to identify deficiencies in relation
to required information and current processes and the Company plans to implement changes in its systems
and controls to meet the new requirements.
Changes in the accounting policies resulting from the adoption of IFRS 9 will generally be applied
retrospectively, except for the changes described below:
The Company intends to take advantage of the exemption that allows it not to restate comparative
information from prior periods arising from changes in the classification and measurement of financial
instruments (including expected credit losses). The differences in the accounting balances of financial assets
and liabilities resulting from the adoption of IFRS 9 will generally be recognized in retained earnings and
reserves as of January 1, 2018;
New hedge accounting requirements should be applied prospectively. However, the Company may choose
to apply the expected change in the accounting for changes in the fair value of the forward term of the
exchange contracts retroactively. The Company has not taken any decision regarding this option;
The following assessments should be made based on the facts and circumstances existing on the date of the
initial adoption:
The determination of the business model within which a financial asset is held;
The designation and revocation of previous designations of certain financial assets and liabilities measured
at fair value;
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
38
The designation of certain equity instruments not held for renewal at fair value in other comprehensive
income.
IFRS 16 Leases
It introduces a single model for the accounting of leases in the balance sheet for tenants. A lessee recognizes
a right of use asset that represents his right to use the leased asset and a lease liability that represents his
obligation to make lease payments. Optional exemptions are available for short-term leases and low value
items. The lessor's accounting remains similar to the current standard, that is, lessors continue to classify
leases as financial or operating.
IFRS 16 replaces existing lease standards, including IAS 17 Leasing Operations and IFRIC 4, SIC 15 and
SIC 27 Complementary Aspects of Leasing Operations.
The standard is effective for annual periods beginning on or after January 1, 2019. Early adoption is
permitted only for financial statements in accordance with IFRSs and only for entity that applies IFRS 15
Revenue from Contracts with Customers or before Date of initial application of IFRS 16.
The Company began an initial assessment of the potential impact on its financial statements. So far, the
most significant impact identified is that the subsidiary Comgás will recognize new assets and liabilities for
its operating leases. In the jointly-owned subsidiary Raízen, it is expected to have significant impacts on
land leases. In addition, the nature of the expenses related to these leases will be changed, since IFRS 16
replaces the line operating lease expense due to depreciation of the right of use and interest on the lease
liabilities. The Company has not yet decided whether to use the optional exemptions.
As a lessee, the Company may apply the standard using a:
- Retrospective approach; or
- Modified retrospective approach with optional practical dossiers.
The lessee will apply this choice consistently to all of his leases. The Company should apply IFRS 16
initially on January 1, 2019. The Company has not yet determined which transition approach to apply.
The Company has not yet quantified the impact of adopting IFRS 16 on its assets and liabilities. The
quantitative effect of the adoption of IFRS 16 will depend specifically on the transition method chosen, the
use of practical files and recognition exemptions, and any additional leases that the Company will enter
into. The Company expects to disclose its transition approach and quantitative information prior to
adoption.
There are no other IFRS standards or IFRIC interpretations that have not come into effect and are expected
to have a material impact on the Company.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
39
5 New standards and interpretations adopted
Although the new standards and amendments below apply for the first time in 2016, they do not have a
material impact on the annual consolidated financial statements or the interim consolidated financial
statements of the Company. The nature and the impact of each new standard or amendment are described
below:
(i) Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants
The amendments change the accounting requirements for biological assets that meet the definition of bearer
plants. Under the amendments, biological assets that meet the definition of bearer plants will no longer be
within the scope of IAS 41 Agriculture. Instead, IAS 16 will apply. After initial recognition, bearer plants
will be measured under IAS 16 using the cost model. The amendments also require that produce that grows
on bearer plants will remain in the scope of IAS 41 measured at fair value less costs to sell. For government
grants related to bearer plants, IAS 20 Accounting for Government Grants and Disclosure of Government
Assistance will apply. These amendments substantially impact the jointly controlled company, Raízen
Energia, do not have any effect to the Company since it does not have any bearer plants.
(ii) Discontinued operation
According to the note 18, due to the partial sale of RADAR segment’s shares and as required by IFRS 5 -
Non-current assets available for sale and discontinued operations - the Company is restating the
presentation of its income statement for the year ended December 31, 2015
(iii) Tax installments
During 2016, the Company identified an immaterial error in the accounting record of tax installment
liabilities, related to others federal taxes than income tax referring to prior years.
Management concluded that the effect of this had no significant impact on the Company's financial
statements for the years ended on December 31, 2016, 2015 and 2016. The accumulated effect was
recognized on January 1, 2015 in the amount of R$ 73,092.
The impact of both restatements for the year ended December 31, 2015, as follows:
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
40
Parent company
December 31, 2015 As
issued CPC 27 effect (i) Tax installment (iii)
December 31, 2015
restated
Assets
Current assets 951,424 - - 951,424
Investments in associates 11,355,142 (92,330) - 11,262,812
Other recoverable tax - - 33,897 33,897
Other non-current assets 5,446,173 - - 5,446,173
Total assets 17,752,739 (92,330) 33,897 17,694,306
Liabilities
Current liabilities 942,089 - - 942,089
Other taxes payable 25,230 - 153,486 178,716
Deferred tax liabilities 465,788 - (46,497) 419,291
Non-current liabilities 7,473,444 - - 7,473,444
Total liabilities 8,906,551 - 106,989 9,013,540
Shareholders' equity
Share capital 3,822,725 - - 3,822,725
Treasury shares (58,694) - - (58,694)
Additional paid in capital 955,326 - - 955,326
Other comprehensive loss (184,691) - - (184,691)
Profit reserve 4,311,522 (92,330) (73,092) 4,146,100
Equity attributable to owners of the parent
Non-controlling interests 8,846,188 (92,330) (73,092) 8,680,766
- - - -
Total shareholders' equity 8,846,188 (92,330) (73,092) 8,680,766
Total shareholders' equity and liabilities 17,752,739 (92,330) 33,897 17,694,306
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
41
Consolidated
As issued CPC 27 effect (i) Tax installment (iii) Restated
Assets
Current assets 5,165,823 - - 5,165,823
Investments in joint ventures 8,329,518 (92,330) - 8,237,188
Other recoverable tax 42,578 - 33,897 76,475
Other non-current assets 16,844,272 - - 16,844,272
Total assets 30,382,191 (92,330) 33,897 30,323,758
Liabilities
Current liabilities 3,345,053 - - 3,345,053
Other taxes payable 25,230 - 153,486 178,716
Deferred tax liabilities 1,415,135 - (46,497) 1,368,638
Non-current liabilities 13,062,097 - - 13,062,097
Total liabilities 17,847,515 - 106,989 17,954,504
Shareholders' equity
Share capital 3,822,725 - - 3,822,725
Treasury shares (58,694) - - (58,694)
Additional paid in capital 955,326 - - 955,326
Other comprehensive loss (184,691) - - (184,691)
Profit reserve 4,311,522 (92,330) (73,092) 4,146,100
Equity attributable to owners of the parent 8,846,188 (92,330) (73,092) 8,680,766
Non-controlling interests 3,688,488 - - 3,688,488
Total shareholders' equity 12,534,676 (92,330) (73,092) 12,369,254
Total shareholders' equity and liabilities 30,382,191 (92,330) 33,897 30,323,758
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
42
Parent Company
December 31,
2015
(as issued)
CPC 27 effect
(i)
Discontinued
operation (ii)
Tax
installment
(iii)
December 31,
2015
(restated)
Income before equity in earnings of
investees and financial results 83,300 - - - 83,300
Equity in earnings of associates 1,188,730 (80,401) (38,915) - 1,069,414
Equity in earnings of joint ventures (121,179) - - - (121,179)
Equity in earning of investees 1,067,551 (80,401) (38,915) - 948,235
Financial results (741,445) - - (9,242) (750,687)
Loss before taxes 409,406 (80,401) (38,915) (9,242) 280,848
Income tax expense 257,178 - - 3,142 260,320
Loss from continuing operations 666,584 (80,401) (38,915) (6,100) 541,168
Profit from discontinued operations, net of tax - - 38,915 - 38,915
Profit for the period 666,584 (80,401) - (6,100) 580,083
Consolidated
December 31,
2015
(as issued)
CPC 27 effect
(i)
Discontinued
operation (ii)
Tax
installment
(iii)
December 31,
2015
(restated)
Gross profit 2,528,580 - (84,739) - 2,443,841
Operating expense Gross profit (1,271,485) - (20,766) - (1,292,251)
Income before equity in earnings of
investees and financial results 1,257,095 - (105,505) - 1,151,590
Equity in earnings of associates (3,186) - - - (3,186)
Equity in earnings of joint ventures 775,566 (80,401) - - 695,165
Equity in earning of investees 772,380 (80,401) - - 691,979
Financial results (1,128,154) - (10,496) (9,242) (1,147,892)
Loss before taxes 901,321 (80,401) (116,001) (9,242) 695,677
Income tax expense 66,942 - 15,134 3,142 85,218
Loss from continuing operations 968,263 (80,401) (100,867) (6,100) 780,895
Profit from discontinued operations, net
of tax - - 100,867 - 100,867
Loss for the period 968,263 (80,401) - (6,100) 881,762
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
43
6 Segment Information
The following segment information is based on the information used by Cosan's senior management to
assess the performance of the operating segments and to make decisions with regards to the allocation
of resources. This information is prepared on a consistent basis with the accounting policies used in the
preparation of the consolidated financial statements. Cosan evaluates operating performance based on
the measure of EBITDA. A reconciliation of EBITDA to profit (loss) of the period is presented below.
Operating segments
(i) Raízen Energia: production and marketing of a variety of products derived from sugar cane, including
raw sugar (VHP), anhydrous and hydrated ethanol, and activities related to energy cogeneration from
sugarcane bagasse. In addition, this segment holds interests in companies engaged in research and
development on new technology;
(ii) Raízen Combustíveis: distribution and marketing of fuels, mainly through a network of service stations
under the brand "Shell" throughout Brazil;
(iii) COMGÁS: distribution of piped natural gas to part of the State of São Paulo (approximately 180
municipalities, including the region called Greater São Paulo) to customers in the industrial, residential,
commercial, automotive, thermogeneration and cogeneration sectors;
(iv) Lubricants: production and distribution of lubricants under the Mobil brand in Brazil, Bolivia, Uruguay
and Paraguay, as well as European and Asian market with a Comma.
Conciliation
(i) Cosan´s other business: other investments, in addition to the corporate activities of the Company. The
other business segments include subsidiaries responsible for raising loans to the group
The segments Raizen Energia and Raizen Combustíveis are investments accounted for under the equity
method and not consolidated in our financial statements, as Pronouncement CPC19 Technical (R2) –
Business arrangements / IFRS11 - Joint arrangements. However, the Company's management analyzes
the information by segment 100% of the results of these segments. Here is the reconciliation of these
segments to the Company's financial information in the "deconsolidation jointly controlled entities".
Below are presented the results of the information and assets by segment, which were measured in
accordance with the same accounting policies used in preparing the consolidated information:
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
44
December 31, 2016
Operating segments Conciliation
Raízen
Energia
Raízen
Combustíveis COMGÁS Radar Lubricants
Cosan
Corporate
Desconsolidated joint
ventures
Segment
elimination /
adjustments
Total
consolidated
Statement of profit or loss:
Net sales 13,133,737 68,143,047 5,657,246 - 1,883,674 873 (81,276,784) - 7,541,793 __Domestic market 6,106,330 68,143,047 5,657,246 - 1,447,794 873 (74,249,377) - 7,105,913
__External market 7,027,407 - - - 435,880 - (7,027,407) - 435,880
Cost of sales (9,967,530) (64,445,939) (3,174,134) - (1,398,751) (13,666) 74,413,469 - (4,586,552) Gross profit 3,166,207 3,697,108 2,483,112 - 484,923 (12,794) (6,863,315) - 2,955,241
Selling expenses (732,680) (1,303,338) (670,557) - (362,045) (291) 2,036,018 - (1,032,893)
General and administrative expenses (567,400) (447,762) (332,349) - (72,567) (165,549) 1,015,162 - (570,465) Other income (expenses), net (15,249) 844,257 (26,437) - 7,523 (96,849) (829,008) - (115,763)
Financial results 531,049 (584,487) (263,169) - (77,301) (967,399) 53,438 - (1,307,869)
__Financial expenses (918,912) (273,874) (730,422) - (49,102) (940,841) 1,192,786 - (1,720,365) __Financial Income 653,670 233,453 466,646 - 4,928 328,338 (887,123) - 799,912
__Foreing exchange losses, net (57,951) 750,939 223,943 - 47,288 730,350 (692,988) - 1,001,581
__Derivatives 854,242 (1,295,005) (223,336) - (80,415) (1,085,246) 440,763 - (1,388,997) Equity in earnings of associates (68,641) (310) - - (9,755) 474,586 68,951 (477,651) (12,820)
Equity in earnings of joint ventures - - - - - 1,570,132 - - 1,570,132
Income tax (expense)benefit (658,860) (673,099) (369,966) - (553) 310,305 1,331,959 - (60,214)
Profit (loss) from continuing
operations 1,654,426 1,532,369 820,634 - (29,775) 1,112,141 (3,186,795) (477,651) 1,425,349
Profit (loss) from discontinued
operations, net of tax - - - 69,261 - (76,057) - (28,466) (35,262)
Net income attributable to:
Owners of the Parent 1,654,338 1,476,244 514,228 21,664 (29,775) 1,036,084 (3,130,582) (506,117) 1,036,084
Non-controlling interests 88 56,125 306,406 47,597 - - (56,213) - 354,003
1,654,426 1,532,369 820,634 69,261 (29,775) 1,036,084 (3,186,795) (506,117) 1,390,087
Other select data:
Depreciation and amortization 2,192,019 624,395 510,957 - 88,350 16,007 (2,816,414) - 615,314 EBITDA 3,974,256 3,414,350 1,964,726 - 136,429 1,785,242 (7,388,606) (477,651) 3,408,746
Additions to PP&E, intangible and biological assets 2,001,509 797,009 438,366 - 41,557 11,356 (2,798,518) - 491,279
Reconciliation of EBITDA:
Profit (loss) for the period 1,654,426 1,532,369 820,634 - (29,775) 1,112,141 (3,186,795) (477,651) 1,425,349
Income tax and social contribution 658,860 673,099 369,966 - 553 (310,305) (1,331,959) - 60,214
Financial results, net (531,049) 584,487 263,169 - 77,301 967,399 (53,438) - 1,307,869
Depreciation and amortization 2,192,019 624,395 510,957 - 88,350 16,007 (2,816,414) - 615,314
EBITDA 3,974,256 3,414,350 1,964,726 - 136,429 1,785,242 (7,388,606) (477,651) 3,408,746
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
45
December 31, 2015 (Restated)
Operating segments Conciliation
Raízen Energia Raízen
Combustíveis COMGÁS Radar Lubricants
Cosan
Corporate
Desconsolidated
joint ventures
Segment
elimination /
adjustments
Total
consolidated
Statement of profit or loss:
Net sales 11,080,850 61,412,966 6,597,016 - 1,751,730 435 (72,493,816) - 8,349,181 __Domestic market 4,438,149 61,412,966 6,597,016 - 1,385,190 435 (65,851,115) - 7,982,641
__External market 6,642,701 - - - 366,540 - (6,642,701) - 366,540
Cost of sales (9,148,101) (58,196,255) (4,580,204) - (1,322,326) (2,810) 67,344,356 - (5,905,340) Gross profit 1,932,748 3,216,711 2,016,813 - 429,402 (2,374) (5,149,459) - 2,443,841
Selling expenses (616,915) (1,188,549) (627,519) - (291,647) - 1,805,464 - (919,166)
General and administrative expenses (518,848) (394,570) (332,763) - (77,666) (154,676) 913,418 - (565,105) Other income (expenses), net (19,147) 294,784 (7,901) - 2,195 197,726 (275,637) - 192,020
Financial results (624,695) (124,598) (181,889) - (109,860) (856,143) 749,293 - (1,147,892)
__Financial expenses (919,994) (170,560) (409,768) - (120,325) (883,981) 1,090,554 18,333 (1,395,741) __Financial Income 650,446 173,477 247,047 - 4,870 178,254 (823,923) (18,333) 411,838
__Foreing exchange losses, net (1,031,777) (415,983) 126,282 - (10,213) (739,233) 1,447,760 - (623,164)
__Derivatives 676,630 288,468 (145,450) - 15,808 588,817 (965,098) - 459,175 Equity in earnings of associates (42,967) 8,893 - - (11,596) 340,590 34,074 (332,179) (3,185)
Equity in earnings of joint ventures - - - - - 695,165 - - 695,165
Income tax (expense)benefit 40,328 (536,540) (248,354) - 12,693 320,880 496,212 - 85,219
Profit (loss) from continuing
operations 150,504 1,276,131 618,386 - (46,481) 541,168 (1,426,635) (332,179) 780,894
Profit (loss) from discontinued
operations, net of tax - - - 100,867 - 38,915 - (38,915) 100,867
Net income attributable to:
Owners of the Parent 150,504 1,237,984 618,386 100,867 (46,481) 580,083 (1,388,488) (672,773) 580,082
Non-controlling interests - 38,147 - - - - (38,147) 301,679 301,679
150,504 1,276,131 618,386 100,867 (46,481) 580,083 (1,426,635) (371,094) 881,761
Other select data:
Depreciation and amortization 2,057,365 579,603 481,287 - 75,077 4,678 (2,636,968) - 561,042 EBITDA 2,792,236 2,516,872 1,529,916 - 125,763 1,081,109 (5,309,108) (332,179) 2,404,609
Additions to PP&E, intangible and biological assets 1,776,372 797,299 521,215 - 43,464 42,062 (1,973,671) - 608,667
Reconciliation of EBITDA:
Profit (loss) for the period 150,504 1,276,131 618,386 - (46,481) 541,168 (1,426,635) (332,179) 780,894
Income tax and social contribution (40,328) 536,540 248,354 - (12,693) (320,880) (496,212) - (85,219)
Financial results, net 624,695 124,598 181,889 - 109,860 856,143 (749,293) - 1,147,892
Depreciation and amortization 2,057,365 579,603 481,287 - 75,077 4,678 (2,636,968) - 561,042
EBITDA 2,792,236 2,516,872 1,529,916 - 125,763 1,081,109 (5,309,108) (332,179) 2,404,609
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
46
December 31, 2016
Operating segments Conciliation
Statement of financial position: Raízen Energia Raízen
Combustíveis COMGÁS Lubricants
Cosan
Corporate
Desconsolidated joint
ventures
Segment
elimination Total consolidated
Cash and cash equivalents 2,787,588 757,140 2,108,253 203,855 1,678,822 (3,544,728) - 3,990,930
Marketable securities - - 202,568 10,958 157,641 - - 371,167
Trade receivables 682,813 2,518,713 513,423 240,059 487 (3,201,526) - 753,969 Derivative financial instruments 1,243,260 178,060 437,137 - 310,274 (1,421,320) - 747,411
Inventories 2,293,492 2,108,825 114,745 228,941 2,487 (4,402,317) - 346,173
Other financial assets 711,453 - - - 70,487 (711,453) - 70,487 Assets held for sale - - - - - - - -
Other current assets 3,030,674 1,456,418 80,758 141,972 650,979 (4,487,092) (79,848) 793,861
Other non-current assets 2,852,423 1,089,809 307,306 26,036 1,436,626 (3,942,232) (8,111) 1,761,857 Investment in associates 393,159 - - 19,400 4,395,769 (393,159) (4,175,069) 240,100
Investment in joint ventures - - - - 8,506,395 - - 8,506,395
Biological assets 1,119,623 - - - - (1,119,623) - - Investment property - - - - - - - -
Property, plant and equipment 10,525,166 2,379,438 - 238,346 150,983 (12,904,604) - 389,329
Intangible assets and goodwill 3,224,303 4,532,282 8,550,984 770,118 7,048 (7,756,585) - 9,328,150 Loans, borrowings and debenture (11,556,950) (1,043,995) (4,070,075) (471,661) (4,596,393) 12,600,945 - (9,138,129)
Derivative financial instruments (789,193) (648,070) - (35,155) (248,386) 1,437,263 - (283,541)
Trade payables (1,147,089) (1,148,013) (1,226,634) (232,690) (8,246) 2,295,102 - (1,467,570) Employee benefits payable (314,989) (92,573) (63,904) (30,187) (26,918) 407,562 - (121,009)
Preferred shareholders payable in subsidiaries - - - - (1,769,427) - - (1,769,427)
Liabilities held for sale - - - - - - - - Other current liabilities (1,507,193) (2,245,227) (211,900) (168,995) (369,298) 3,752,420 87,958 (662,235)
Other non-current liabilities (1,367,686) (4,714,035) (1,549,441) (132,414) (1,383,724) 6,081,721 - (3,065,579)
Total assets (net of liabilities) allocated by segment 12,180,854 5,128,772 5,193,220 808,583 8,965,606 (17,309,626) (4,175,070) 10,792,339
Total assets 28,863,954 15,020,685 12,315,174 1,879,685 17,367,998 (43,884,639) (4,263,028) 27,299,829
Equity attributable to owners of the parent 12,181,816 4,941,504 5,193,220 808,583 8,965,606 (17,123,320) (6,001,803) 8,965,606 Non-controlling interests (962) 187,268 - - - (186,306) 1,826,733 1,826,733
Total shareholders' equity 12,180,854 5,128,772 5,193,220 808,583 8,965,606 (17,309,626) (4,175,070) 10,792,339
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
47
December 31, 2015 (Restated)
Operating segments Conciliation
Statement of financial position: Raízen Energia Raízen
Combustíveis COMGÁS Radar Lubricants
Cosan
Corporate
Desconsolidated joint
ventures
Segment
elimination Total consolidated
Cash and cash equivalents 2,995,495 885,880 1,967,643 1,016 96,907 1,063,964 (3,881,375) - 3,129,530
Marketable securities - - - 97,222 - - - - 97,222
Trade receivables 719,092 2,058,601 540,133 38,510 220,417 247 (2,777,693) - 799,307 Derivative financial instruments 1,465,816 255,665 665,032 - 12,363 1,615,464 (1,721,481) - 2,292,859
Inventories 2,371,987 1,287,946 134,347 - 293,916 2,854 (3,659,933) - 431,117
Other financial assets - - - 144,208 - - - - 144,208 Other current assets 1,579,568 1,029,510 132,959 120,615 51,926 209,529 (2,609,078) (11,525) 503,504
Other non-current assets 3,425,968 921,891 279,091 51 (135,853) 1,971,010 (4,347,859) (9,716) 2,104,583
Investments in associates 225,670 248,456 - - 8,453 5,660,434 (474,126) (5,528,751) 140,136 Investments in joint ventures - - - - - 8,237,188 - - 8,237,188
Biological assets 678,564 - - - - - (678,564) - -
Investment property - - - 2,595,035 - - - - 2,595,035 Property, plant and equipment 11,027,461 2,409,555 - 2,029 243,080 156,691 (13,437,016) - 401,800
Intangible assets and goodwill 3,261,623 4,414,352 8,620,436 1,669 818,362 6,802 (7,675,975) - 9,447,269
Loans, borrowings and debentures (11,549,211) (3,226,849) (3,823,066) - (512,759) (5,419,878) 14,776,060 - (9,755,703) Derivative financial instruments (676,321) (67,902) - - (291) (740,427) 744,223 - (740,718)
Trade payables (1,126,540) (937,177) (1,302,397) (2,511) (235,663) (4,251) 2,063,717 - (1,544,822)
Employee benefits payable (315,704) (83,214) (65,522) (5,684) (15,061) (20,140) 398,918 - (106,407) Other current liabilities (920,298) (968,904) (103,334) (35,465) (135,942) (209,517) 1,889,202 21,242 (463,016)
Other non-current liabilities (1,364,086) (3,129,160) (1,180,987) (104,403) (209,244) (3,849,204) 4,493,246 - (5,343,838)
Total assets (net of liabilities) allocated by segment 11,799,084 5,098,650 5,864,335 2,852,292 500,611 8,680,766 (16,897,734) (5,528,750) 12,369,254
Total assets 27,751,244 13,511,856 12,339,641 3,000,355 1,609,571 18,924,183 (41,263,100) (5,549,992) 30,323,758
Equity attributable to owners of the parent 11,800,047 4,926,655 5,864,335 2,852,292 500,611 8,680,766 (16,726,702) (9,217,238) 8,680,766
Non-controlling interests (963) 171,995 - - - - (171,032) 3,688,488 3,688,488
Total shareholders' equity 11,799,084 5,098,650 5,864,335 2,852,292 500,611 8,680,766 (16,897,734) (5,528,750) 12,369,254
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
48
Net Sales by segment:
Operating segments December, 31 2016 December, 31 2015
(Restated)
Raízen Energia
Ethanol 6,480,409 4,671,006
Sugar 5,794,771 5,557,298
Cogeneration 520,468 554,876
Other 338,089 297,670
13,133,737 11,080,850
Raízen Combustíveis
Fuels 68,143,047 61,412,966
68,143,047 61,412,966
COMGÁS
Industrial 3,640,920 4,206,947
Residenctal 793,336 677,692
Thermo generation 116,418 511,942
Cogeneration 216,032 271,641
Automotive 205,986 197,260
Commercial 238,390 286,491
Construction revenue 339,025 408,086
Other 107,139 36,957
5,657,246 6,597,016
Lubricants
Lubricants 1,642,899 1,514,005
Basic oil 219,092 222,009
Other 21,683 15,716
1,883,674 1,751,730
Conciliation
Cosan Corporate
Other 873 440
873 440
IFRS 11 - Desconsolidated of adjustments /
eliminations joint ventures and eliminations (81,276,784) (72,493,816)
Total 7,541,793 8,349,186
Concentration of custumers
(i) COMGÁS and Lubricants
Sales in this segments are sprayed with no customers or specific economic groups representing 10% or
more of sales in this segment in the period.
7 Cash and cash equivalents
Parent Company Consolidated
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Cash and bank accounts 525 3 53,654 164,093
Savings account - - 409,333 28,278
Financial Investments 1,066,405 731,046 3,527,943 2,937,159
1,066,930 731,049 3,990,930 3,129,530
a) The savings account balances that on 31 December 2015 were presented as financial investments were
relocated for better presentation, these financial statements.
Financial investments are as follows:
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
49
Parent Company Consolidated
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Investment fund
Repurchase agreements (i) 944,626 97,485 2,840,760 1,248,983
Bank certificate of deposits - CDB (ii) 120,755 567,078 363,147 765,900
Other - 65,552 - 170,469
1,065,381 730,115 3,203,907 2,185,352
Bank investments
Repurchase agreements (i) - - - 407,710
Bank certificate of deposits - CDB (ii) - - 323,036 343,083
Other 1,024 931 1,000 1,014
1,024 931 324,036 751,807
1,066,405 731,046 3,527,943 2,937,159
(i) These refer to purchases of assets, with the commitment to repurchase at a rate previously established
by the parties, with original maturities of 90 days or less or for which there are no penalties or other
restrictions for early redemption.
(ii) These refer mainly to Bank Deposit Certificates - CDBs, issued by Brazilian financial institutions with
original maturities of 90 days or less or for which there are no penalties or other restrictions for early
redemption.
8 Marketable securities Parent company Consolidated
December 31,
2016 December
31, 2015 December 31,
2016 December
31, 2015
Government security (i) 123,399 - 371,167 97,222
123,399 - 371,167 97,222
(i) Sovereign debt securities with interest connected to SELIC issued by the National Treasury with
daily liquidity in the secondary market
9 Trade receivables
Consolidated
December 31, 2016 December 31, 2015
(restated)
Domestic – Brazilian Reais 813,727 829,912
Export – Foreign currency 11,942 16,114
Allowance for doubtful accounts (71,700) (46,719)
753,969 799,307
Current 713,468 759,710
Non-current 40,501 39,597
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
50
The ageing of trade receivables is as follows:
Consolidated
December 31, 2016 December 31, 2015
(restated)
Not overdue 697,981 736,819
Overdue:
From 1 to 30 days 44,093 45,365
From 31 to 60 days 11,993 7,004
From 61 to 90 days 3,843 3,025
More than 90 days 67,759 53,813
Allowance for doubtful accounts (71,700) (46,719)
753,969 799,307
Changes in the allowance for doubtful accounts are as follows:
Consolidated
At January 01, 2015 (26,113)
Provision (21,055)
Reversal 449
December 31, 2015 (46,719)
Provision (30,448)
Reversal 5,467
December 31, 2016 (71,700)
10 Inventories Consolidated
December 31, 2016 December 31, 2015
Finished goods 223,608 289,708
Product in process 73,527 86,981
Spare parts and others 49,038 54,428
346,173 431,117
The balances are presented net of the provision for obsolete inventories in the amount of R$
1,593 as of December 31, 2016 (R$ 3,135 as of December 31, 2015).
11 Other current tax receivables Parent Company Consolidated
December 31,
2016 December 31,
2015 (restated) December 31,
2016 December 31,
2015(restated)
ICMS - State VAT - - 102,153 121,754
Credit installment 36,708 67,142 36,708 67,142
PIS and COFINS - Revenue tax 3,720 3,718 23,671 11,700
Other 29 78 11,318 11,826
40,457 70,938 173,850 212,422
Current 3,749 37,041 94,806 135,947
Non-Current 36,708 33,897 79,044 76,475
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
51
12 Related parties
a) Receivables from and payables to related parties:
Parent Company Consolidated
December
31, 2016
December
31, 2015
December
31, 2016
December
31, 2015
Current Asset
Corporate operation / Agreements
Raízen Energia S.A. 10,638 17,101 11,958 21,313
Rumo Logística Operadora Multimodal S.A 17,391 8,794 17,777 9,346
Aguassanta Participações S.A. 6,342 6,371 6,342 6,371
Cosan Biomassa S.A 2,330 427 - -
Cosan Limited 819 982 819 982
Cosan Lubrificantes e Especialidades 803 8,436 - -
Cosan Logística 15 18 1,442 3,534
Radar Propriedades Agricolas S.A. 7 1,035 517 -
Raízen Combustíveis S.A. 1 269 1,213 709
Other 490 653 517 4,086
38,836 44,086 40,585 46,341
Financial operations
Raízen Energia S.A. 9,672 9,672 9,672 9,672
Raízen Combustíveis S.A. - - - 1,102
Cosan Limited - - - 29,485
9,672 9,672 9,672 40,259
48,508 53,758 50,257 86,600
Non-current assets
Preferred shares
Raízen Energia S.A. 114,473 89,763 114,473 89,763
Janus Brasil Participações S.A 28,705 20,875 28,705 20,875
143,178 110,638 143,178 110,638
Financial operations
Rezende Barbosa 38,944 70,365 38,944 70,368
Raízen Energia S.A. - 23,029 - 23,029
Novvi LLC - - - 17,310
Cosan Limited - - 25,113 -
38,944 93,394 64,057 110,707
Corporate restructuring
Other 7,846 5,706 1,618 -
189,968 209,738 208,853 221,345
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
52
Parent Company Consolidated
December
31, 2016
December
31, 2015
December
31, 2016
December
31, 2015
Current liabilieites
Corporate oprations / Agreements
Raízen Energia S.A. 128,398 97,253 141,594 100,505
Cosan Lubrificantes e especialidades 86,148 394 - -
Raízen Combustíveis S.A. 8,232 8,927 7,473 9,447
Radar Propriedades Agricolas S.A. 516 516 516 -
Rumo Logística Operadora Multimodal S.A 439 1,558 524 1,512
Cosan Biomassa S.A. - 216,982 - -
Other - 24 - -
223,733 325,654 150,107 111,464
Financial opreations
Cosan Overseas Limited 21,059 25,682 - -
Cosan Luxembourg S.A. 62,014 76,416 - -
Raízen Energia S.A. - - - 3,095
83,073 102,098 - 3,095
306,806 427,752 150,107 114,559
Non-current liabilities
Financial operations
Cosan Luxembourg S.A. 2,231,663 2,744,584 - -
Cosan Overseas Limited 1,640,956 1,966,067 - -
3,872,619 4,710,651 - -
b) Related party transactions:
Parent Company
December 31, 2016 December 31, 2015
Shared income (expense)
Aguassanta Participações S.A. 388 431
Cosan Biomassa S.A. 2,075 739
Radar Propriedades Agrícolas S.A. 2,254 3,800
Cosan Logística S.A 9,870 10,221
Cosan Lubrificantes e Especialidades 8,368 9,614
Raízen Energia S.A. (3,855) (3,921)
19,100 20,884
Financial result
Cosan Lubrificantes e Especialidades - 28
Cosan Limited (162) 314
Cosan Luxembourg S.A. 364,151 (948,648)
Pasadena Empreed. Partic. S.A. 706 590
Cosan Overseas Limited 184,915 (753,466)
Raízen Energia S.A. 2,441 2,440
Other (223) (188)
551,828 (1,698,930)
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
53
Consolidated
December 31, 2016 December 31, 2015
Product sales
Cosan Logística S.A 38,209 31,096
Raízen Combustíveis S.A 12,732 14,666
Raízen Energia S.A. 27,757 19,099
78,698 64,861
Purchase of goods / Inputs
Raízen Energia S.A. (1,391) (2,266)
Raízen Combustíveis S.A. (3) (119)
(1,394) (2,385)
Discontinued operation
Raízen Energia S.A 57,007 58,508
57,007 58,508
Shared income (expanse)
Aguassanta Participações S.A. 388 431
Cosan Logística S.A 9,870 10,221
Radar Propriedades Agrícolas S.A. 260 -
Raízen Energia S.A. (43,261) (32,864)
(32,743) (22,212)
Financial result
Cosan Limited 369 444
Cosan Logística S.A - 512
Raízen Energia S.A. 2,441 2,440
Other (182) (198)
2,628 3,198
c) Officers’ and directors’ compensation
The fixed and variable remuneration of key persons, including directors and members of the board, are recorded
in the consolidated income statement as follows:
December 31, 2016 December 31, 2015
Short-term benefits to employees and managers 50,846 37,322
Post-employment benefits 561 235
Other long-term benefits 533 -
Benefits from termination of employment contract 2,367 -
Stock option expense 8,369 7,982
62,676 45,539
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
54
13 Investments in associates
a) Information on associates and subsidiaries
Companhia de
Gás de São
Paulo –
“COMGÁS” Cosan Biomassa
Cosan
Global
Cosan
Investimentos e
Participações S.A.
Cosan
Lubrificantes e
Especialidades
S.A.
Cosan
Luxembourgo S.A.
Radar II
Propriedades
Agrícolas S.A. (a)
Radar
Propriedades
Agrícolas S.A.(b)
Tellus Brasil
Participações S.A
(c)
Janus Brasil
Participações
S.A. (d) Other Total
Shares issued by the investee 127,313,301 149,289,282 1 3,778,868,643 290,441 500,000 830,690,258 21,148,989 65,957,282 1,907,000 -
Shares held by Cosan 79,777,349 149,289,282 1 3,778,868,643 290,437 500,000 539,979,397 4,001,167 33,638,214 934,430 -
Cosan ownership interest (%) 62.66% 100% 100% 100% 100% 100% 51% 51% 51% 51% -
January 1, 2015 3,760,508 131,643 60,875 5,528,606 194,888 12,542 627,245 611,039 94,506 13,063 5,268 11,040,183
Adoption to CPC 29 effect - - - (11,929) - - - - - - - (11,929)
January 1, 2015 (restated) 3,760,508 131,643 60,875 5,516,677 194,888 12,542 627,245 611,039 94,506 13,063 5,268 11,028,254
Equity income of investee 378,653 (12,363) 128,759 731,027 (239,358) 94,965 - - 7,822 2,836 (22,926) 1,069,415
Equity income of descontinued
opearation - - - - - - 24,734 14,181 - - - 38,915
Equity method adjustments 685 - - (225,207) - - 920 1,646 (429) - (57,425) (279,810)
Dividends (379,819) - - (161,220) - - (4,569) (1,758) (2,261) - - (549,627)
Capital incrase / Decrease - 89,569 11,029 - (19,548) - - - - 7,814 105 88,969
Other (5,438) - - (128,976) - - - - - - 1,110 (133,304)
December, 31 2015 (restated) 3,754,589 208,849 200,663 5,732,301 (64,018) 107,507 648,330 625,108 99,638 23,713 (73,868) 11,262,812
Equity income of investee 507,700 (30,364) (113,767) 1,511,898 (3,327) 15,145 90 (1,013) 5 3,938 (14,460) 1,875,845
Equity income of descontinued
opearation - - - - - - 19,645 8,819 - - - 28,464
Sale of investment - - - - - - (617,684) (572,955) - - - (1,190,639)
Equity method adjustments (35,097) 6,000 - 46,857 - - 66 108 - (90) 70,955 88,799
Dividends (870,740) - - (350,549) - - (20,475) (4,919) (2,641) (1,393) - (1,250,717)
Capital incrase / Decrease - (216,982) 7,418 - 100,000 199,656 - - - 7,830 - 97,922
Other 10,036 34,000 - (793,583) (348) - 565 - - - 2,807 (746,523)
December, 31 2016 3,366,488 1,503 94,314 6,146,924 32,307 322,308 30,537 55,148 97,002 33,998 (14,566) 10,165,963
(a) The Company has 3% of the economic benefits of this associate as established in the shareholders agreement.
(b) The Company has 2,1% of the economic benefits of this associate as established in the shareholders agreement.
(c) The Company has 5% of the economic benefits of this associate as established in the shareholders agreement.
(d) The Company has 5,1% of the economic benefits of this associate as established in the shareholders agreement.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
55
Financial information of associates:
December, 31 2016
Assets Liabilities
Shareholders'
equity
Profits and
Losses
Cosan Lubrificantes e Especialidades S.A. 1,988,500 (1,956,114) (32,386) (3,191)
Radar Propriedades Agrícolas S.A. 2,272,186 (76,967) (2,195,219) 6,277
Radar II Propriedades Agrícolas S.A. 1,025,099 (7,197) (1,017,902) 33,151
Companhia de Gás de São Paulo – “COMGÁS” 12,315,173 (7,121,953) (5,193,220) 820,634
Cosan Investimentos e Participações S.A. 6,158,200 (11,275) (6,146,925) 1,511,899
Cosan Luxembourg S.A. 3,144,494 (2,822,185) (322,309) 15,145
Cosan Global 94,313 - (94,313) (113,768)
Cosan Biomassa 168,794 (167,293) (1,501) (30,365)
Tellus Brasil Participações Ltda 1,351,229 (137,817) (1,213,412) 25,240
Janus Brasil Participações S.A. 1,981,815 (86,357) (1,895,458) 61,475
December, 31 2015
Assets Liabilities
Shareholders'
equity
Profits and
Losses
Cosan Lubrificantes e Especialidades S.A. 1,875,876 (1,939,894) 64,018 (239,362)
Radar Propriedades Agrícolas S.A. 2,293,693 (78,667) (2,215,026) 74,956
Radar II Propriedades Agrícolas S.A. 1,004,544 (7,112) (997,432) 38,053
Companhia de Gás de São Paulo – “COMGÁS” 8,868,031 (5,686,629) (3,181,402) 698,852
Cosan Investimentos e Participações S.A. 5,780,389 (6,458) (5,773,931) 760,419
Cosan Luxembourg S.A. 3,621,407 (3,513,899) (107,508) 94,965
Cosan Global 200,663 - (200,663) 128,758
Cosan Biomassa 371,311 (162,463) (208,848) (12,265)
Tellus Brasil Participações Ltda 1,966,635 (3,013) (1,963,622) 144,868
Janus Brasil Participações S.A. 967,850 (135,084) (832,766) 19,155
b) Consolidated
Tellus Brasil
Participações
S.A.
Novvi
Limited
Liability
Company
Radar
Propriedades
Agricolas
S.A
Radar II
Propriedades
Agricolas
S.A
Janus Brasil
Participações
S.A.
Other
investments Total
Shares issued by the investee 65.957.282 200.002 16,166,927 21,148,989 65,957,282 -
Shares held by Cosan 33.638.214 100.001 31,699,465 4,001,167 33,638,214 -
Cosan ownership interest (%) 51.00% 33.33% 51.00% 51.00% 51.00% -
December, 31 2014 94,506 14,522 13,063 - - 8,587 130,678
Equity income of investee 7,822 (11,586) 2,836 - - (2,258) (3,186)
Equity method adjustments (429) 3,847 - - - 2,767 6,185
Dividends (2,261) - - - - - (2,261)
Capital incrase / Decrease - - 7,814 - - - 7,814
Other - - - - - 906 906
December, 31 2015 (restated) 99,638 6,783 23,713 - - 10,002 140,136
Equity income of investee 5 (8,917) 3,938 (1,013) 90 (6,923) (12,820)
Sale of investment - - - 56,161 29,907 - 86,068
Equity method adjustments - - (90) - - - (90)
Dividends (2,641) - (1,393) - - - (4,034)
Capital incrase / Decrease - 20,972 7,830 - - - 28,802
Other - - - - 540 1,498 2,038
December, 31 2016 97,002 18,838 33,998 55,148 30,537 4,577 240,100
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
56
Financial information of associates:
31 de dezembro 2016
Ativos Passivos
Patrimônio
líquido
Lucro
(prejuízo) do
exercício
Resultado
abrangente
total
Tellus Brasil Participações S.A.(I) 1,351,229 (137,817) (1,213,412) 25,240 -
Janus Brasil Participações S.A. 1,981,815 (86,357) (1,895,458) 61,475 -
Radar Propriedades Agricolas S.A 2,272,186 (76,967) (2,195,219) 6,277 84
Radar II Propriedades Agricolas S.A 1,025,099 (7,197) (1,017,902) 33,151 20
Novvi Limited Liability Company 31,667 (5,362) (26,305) (7,538) -
31 de dezembro 2015 (reapresentado)
Ativos Passivos
Patrimônio
líquido
Lucro
(prejuízo) do
exercício
Resultado
abrangente
total
Tellus Brasil Participações S.A.(I) 1,966,635 (3,013) (1,963,622) 144,868 (8,813)
Janus Brasil Participações S.A. 967,850 (135,084) (832,766) 19,155 -
Radar Propriedades Agricolas S.A 2,293,693 (78,667) (2,215,026) 74,956 8,699
Radar II Propriedades Agricolas S.A 1,004,544 (7,112) (997,432) 38,053 1,414
Novvi Limited Liability Company 13,951 (37,670) 23,719 (18,278) -
c) nformation in the non-controlling interests in subsidiaries of the Company
Companhia de Gás
de São Paulo -
"COMGÁS"
Radar II
Propriedades
Agrícolas S.A.
Radar
Propriedades
Agrícolas S.A.
Elimination
participation Radar
II in Radar Total
Shares issued by the investee 127,313,301 830,690,258 21,148,989 -
Shares held by Cosan 47,535,952 290,710,861 17,147,822 -
Cosan ownership interest (%) 37.34% 49.00% 49.00% -
December, 31 2014 2,111,578 337,743 1,680,620 (498,944) 3,630,997
Equity income of investee 239,727 13,344 48,609 - 301,680
Equity method adjustments 432 395 7,053 (1,416) 6,464
Dividends (244,600) (2,460) (7,533) 1,510 (253,083)
Other 2,430 - - - 2,430
December, 31 2015 2,109,567 349,022 1,728,749 (498,850) 3,688,488
Equity income of investee 313,207 10,547 37,828 (7,580) 354,002
Sale of investment - (359,607) (1,766,959) 506,430 (1,620,136)
Equity method adjustments (20,913) 38 382 - (20,493)
Dividends (563,371) - - - (563,371)
Other (11,757) - - - (11,757)
December, 31 2016 1,826,733 - - - 1,826,733
Summarized balance sheet
Companhia de Gás de São Paulo - "COMGÁS"
December 31, 2016 December 31, 2015
Current
Assets 3,003,846 2,780,989
Liabilities (1,980,304) (2,047,974)
Current assets, net 1,023,542 733,015
Non-current
Assets 9,311,327 9,558,652
Liabilities (5,141,649) (4,427,331)
Non-current assets, net 4,169,678 5,131,321
Shareholders' equity 5,193,220 5,864,338
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
57
Summarized statement of profit or loss and other comprehensive income
Companhia de Gás de São Paulo - "COMGÁS"
December 31, 2016 December 31, 2015
Net sales 5,657,246 6,597,017
Profit (loss) before taxes 1,312,517 866,742
Income tax (expenses) benefit (411,418) (248,354)
Profit for the year 901,099 618,388
Other comprehensive income (56,012) 1,117
Total comprehensive income 845,087 619,385
Comprehensive income
attributable to non-controlling interests 315,555 239,516
Dividends paid 1,369,456 129,253
Summarized statements of cash flows
Companhia de Gás de São Paulo -
"COMGÁS"
Doze meses findos
em 31/12/2016
Doze meses findos
em 31/12/2015
Cash flows from operating activities
Cash generated from operations 2,151,761 2,224,752
Income taxes paid (70,774) (86,693)
Net cash generated by operating activities 2,080,987 2,138,059
Net cash generated by investing activities (427,791) (521,313)
Net cash by used in financing activities (1,310,018) (622,810)
Increase (decrease) in cash and cash equivalents 343,178 993,936
Cash and cash equivalents at the beginning of year 1,967,643 973,707
Cash and cash equivalents at the end of year 2,310,821 1,967,643
14 Investments in joint ventures
The Company entered into an agreement to jointly deal for 50% stake on the economic control of two
companies:
(i) Raízen Combustíveis which owns a network of about 6,027 service stations throughout Brazil, 67
distribution terminals and 64 airports terminals supplying aviation fuels;
(ii) Raízen Energia, which operates in the production and sale of sugar, ethanol and cogeneration services,
the latter mainly from sugar cane bagasse. Raízen Energia is responsible for the production of more
than, approximately, 2 billion liters of ethanol per year to supply the domestic and foreign market, 4.2
million tons of sugar and 940 MW of installed capacity of electricity. Raízen Energia cultivates harvests
and processes sugar cane - the main raw material used in the production of sugar and ethanol.
Cosan has joint control over Raízen Combustíveis and Raízen Energia by virtue of its 50% share in the
equity of both companies and the requirement for unanimous consent by all shareholders over decisions
related to the significant activities. The investments have been classified as joint ventures under IFRS
11 and therefore the equity method of accounting is used in these consolidated financial statements.
Changes to investments in jointly controlled entities were as follows:
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
58
Consolidated
Raízen
Combustíveis
S.A.
Raízen Energia
S.A.
Total
Shares issued by investee 3,303,168,484 5,902,595,634
Shares held by Cosan 1,651,584,242 2,951,297,817
Cosan ownership interest (%) 50% 50%
December, 31 2014 3,218,466 5,186,036 8,404,502
Adoption to CPC 29 effect (Note 5) - (11,929) (11,929)
December, 31 2014 (restated) 3,218,466 5,174,107 8,392,573
Equity in earnings (losses) of jointly controlled
entities 618,399 76,766 695,165
Equity method adjustments (6,909) (218,518) (225,427)
Interest on capital (201,299) - (201,299)
Dividends (423,824) - (423,824)
December, 31 2015 (restated) 3,204,833 5,032,355 8,237,188
Equity in earnings (losses) of jointly controlled
entities 737,599 832,533 1,570,132
Equity method adjustments 22,949 35,469 58,418
Interest on capital (58,500) (100,000) (158,500)
Dividends (716,060) (484,783) (1,200,843)
December 31, 2016 3,190,821 5,315,574 8,506,395
The statement of financial position and statement of profit or loss of the joint ventures are disclosed in
(Note 6).
Pursuant to the terms of the Raízen Joint Venture - Framework Agreement, Cosan is responsible for
certain legal proceedings that existed prior to the formation of Raízen, net of judicial deposits as of
April 1, 2011, as well as tax installments under the REFIS (tax amnesty and refinancing program),
recorded in "Other taxes payable". Additionally, Cosan has access to a credit line (stand-by facility)
granted to Raízen in the amount of US$500 million, which was unused at December 31, 2016.
15 Discontinued operation
On September 30, 2016, Company signed a Share Purchase Agreement with Mansilla Participações
Ltda. (vehicle from TIAA - Teachers Insurance and Annuity Association of America investment fund),
also a shareholder of Radar and Radar II, committing to sell part of its stake in Radar and Radar II.
The effective sale occurred on November 4, 2016 for the net amount of 1,057,665, canceling out any
options, warrants or other obligations. Cosan maintained an interest in common shares of Radar, due to
its expertise in the sector.
The “Radar” segment was not previously classified as held-for-sale or as a discontinued operation. The
comparative consolidated statement of profit or loss and statements of cash flow have been restated to
show the discontinued operation separately from continuing operations.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
59
(a) Effect of disposal on the financial position of the Group
Consolidated
October, 31 2016
Assets
Cash and cash equivalents -
Investment securities 158,439
Other current assets 25,848
Assets held for sale 78,015
Other financial assets 110,041
Other current assets 21,381
Investment properties 2,628,382
Assets held for sales 3,022,106
Liabilities
Income tax payables 14,957
Other current liabilities 34,547
Deferred tax liabilities 107,548
Liabilities held for sales 157,052
Non-controlling interests 1,592,244
Net assets held for sales 1,272,810
Remaining investment amount (86,068)
Received dividends 25,394
Net assets sold 1,212,136
Consideration received, satisfied in cash 1,057,665
Cash and cash equivalents disposed of (3,897)
Net cash inflows 1,053,768
(b) Net income from discontinued operations
Consolidated
December 31, 2016 December 31, 2015
Gross profit 85,648 - 84,733
Operating expenses (16,458) - 20,772
Income before financial results 69,190 105,505
Financial results 14,843 10,496
Profit before taxes 84,033 116,001
Income tax expenses (14,772) (15,134)
Profit from discontinued operations, net of tax 69,261 100,867
Loss on sale of discontinued operation (i) (158,368) -
Income tax on loss on sale of discontinued operation 53,845 -
Net profit (loss) from discontinued operations, net of tax (35,262) 100,867
Owners of the Parent (76,057) 38,915
Non-controlling interests 40,795 61,952
(35,262) 100,867
(i) In the balance of loss on sale of discontinued operation are also included R$ 206.050 related to
write-off of share purchase rights (warrants).
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
60
(c) Cash flows generated (used in) discontinued operations
December 31, 2016 December 31, 2015
Net cash generated by operating activities 70,087 22,844
Net cash used in investing activities (13,934) (27,839)
Net cash used in financial activities (53,272) -
Net cash generated by (used in) discontinued operating 2,881 (4,995)
The income statement for the period and comparative cash flow is being restated to present
discontinued operations separately from continuing operations.
16 Assets held for sale and investment property
As shown in note 15 Discontinued operations, the "Radar" segment was sold on November 4,
2016. Following is the movement of the two main balances of the segments that formed the
consolidated headings.
Investment
property Assets held for sale Total
At December 31, 2015 2,595,035 111,638 2,706,673
Change in fair values 9,692 - 9,692
Transfers 23,326 (23,326) -
Additions 329 - 329
Disposals - (10,297) (10,297)
Discontinued operation (2,628,382) (78,015) (2,706,397)
At December 31, 2016 - - -
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
61
17 Property, plant and equipment Consolidated Parent Company
Land, buildings and
improvements
Machinery, equipment
and facilities
Railcars and
locomotives Other Total
Total
Cost
At December 31, 2014 171,129 76,022 156,508 32,240 435,899 33,378
Additions - 596 78,926 134 79,656 3,955
Additions business combination 7,298 22,034 3,161 907 33,400 -
Disposals (2,063) (292) - (414) (2,769) (8)
Transfers (i) 56,251 64,595 (179,846) 21,312 (37,688) (1,661)
At December 31, 2015 232,615 162,955 58,749 54,179 508,498 35,664
Additions - (17) 39,570 - 39,553 1,777
Additions business combination (3,137) (5,952) - 17 (9,072) -
Disposals - (1,242) - (44) (1,286) -
Transfers (i) 14,174 31,104 (57,636) 3,191 (9,167) (2,667)
Discontinued operations (598) (143) (663) (1,028) (2,432) -
At December 31, 2016 243,054 186,705 40,020 56,315 526,094 34,774
Cost
At December 31, 2014 (35,409) (34,825) - (14,230) (84,464) (6,714)
Additions (5,256) (8,042) - (5,134) (18,432) (2,300)
Disposals 1,632 268 - 206 2,106 2
Transfers (i) 7,628 (205) - (13,331) (5,908) -
At December 31, 2015 (31,405) (42,804) - (32,489) (106,698) (9,012)
Additions (10,545) (15,074) - (5,963) (31,582) (4,185)
Disposals - 127 - 36 163 -
Transfers (i) 814 (311) - 134 637 -
Discontinued operations 143 97 - 475 715 -
At December 31, 2016 (40,993) (57,965) - (37,807) (136,765) (13,197)
At December 31, 2015 201,210 120,151 58,749 21,690 401,800 26,652
At December 31, 2016 202,061 128,740 40,020 18,508 389,329 21,577
(i) Transfers to intangible assets caused by the completion of those assets.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
62
18 Intangible assets and goodwill Consolidated Parent company
Goodwill
Concession
rights -
COMGAS
Improvements to public
concessions and
operating licenses
Trademarks
Related
customer
relationships
Other Total Total
Cost:
At December 31, 2014 603,505 8,790,010 (5,414) 252,474 862,324 223,294 10,726,193 9,513
Additions - 424,279 - - 83,178 27,781 535,238 -
Business combination (ii) 9,335 - - - - - 9,335 -
Disposal - (52,545) - - (7,728) - (60,273) -
Transfers (i) - (2,632) 5,414 - 2,696 34,540 40,018 1,659
At December 31, 2015 612,840 9,159,112 - 252,474 940,470 285,615 11,250,511 11,172
Additions - 382,788 - - 65,735 21,186 469,709 72
Business combination (ii) 1,968 - - - 5,970 - 7,938 -
Disposal - (189,849) - - (65,694) (62,512) (318,055) -
Transfers (i) - (2,232) - - 343 10,572 8,683 2,668
Discontinued operations - - - - - (2,396) (2,396) -
At December 31, 2016 614,808 9,349,819 - 252,474 946,824 252,465 11,416,390 13,912
Amortization
At December 31, 2014 - (636,730) 5,414 (136,962) (425,282) (106,513) (1,300,073) (3,171)
Additions - (327,098) - (22,827) (155,346) (39,810) (545,081) (1,735)
Disposals - 42,095 - - 5,217 - 47,312 -
Transfers (i) - - (5,414) - - 14 (5,400) 1
Deicontinued operations - - - - - - - -
At December 31, 2015 - (921,733) - (159,789) (575,411) (146,309) (1,803,242) (4,905)
Additions - (362,971) - (22,827) (151,893) (44,319) (582,010) (2,386)
Disposals - 175,435 - - 58,609 62,507 296,551 -
Transfers (i) - (29) - - - (124) (153) -
Discontinued operations - - - - - 614 614 -
At December 31, 2016 - (1,109,298) - (182,616) (668,695) (127,631) (2,088,240) (7,291)
At December 31, 2015 612,840 8,237,379 - 92,685 365,059 139,306 9,447,269 6,267
At December 31, 2016 614,808 8,240,521 - 69,858 278,129 124,834 9,328,150 6,621
(i) Refer to intangible transfers due to the capitalization of these assets.
(ii) December 1St, 2015, Cosan, through its subsidiary Cosan Lubrificantes e Especialidades ("CLE"), acquired 100% of the common shares of Ilha terminal for
R$ 66,672, generating a preliminary addition the "goodwill" of the segment lubricants R$ 11,303. The transferred, net of cash received, totaled R$ 66,659.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
63
Capitalization of borrowing costs
Capitalized borrowing costs for period ended on December 31, 2016, amounted to R$ 14,625 (R$
20,098 for period ended on December 31, 2015), relating to interest on loans obtained for the
construction of these assets. The weighted average interest rate used to capitalize borrowing costs on
the balance of construction in progress, was 11.48% p.a. for the period ended on December 31, 2016
(11.47% p.a. on December 31, 2015).
Impairment testing of cash-generating units (“CGU”) goodwill
The Company tests the recoverable amounts of goodwill ( intangible assets with defined useful life)
arising from business combination transactions annually. Property, plant and equipment and definite life
intangible assets, that are subject to depreciation and amortization are tested for impairment whenever
events or changes in circumstances indicate that the carrying amounts may not be recoverable.
The combined carrying amounts of goodwill allocated to each cash-generating unit are as follows:
Consolidated
December 31, 2016 December 31, 2015
Cash-generating unit – Lubricants 614,765 612,797
Cash-generating unit Cosan - other business 43 43
Total goodiwill 614,808 612,840
Recoverable amount is determined by reference to the value in use, using the discounted cash flows
model based on management‟s estimated budget information which takes into consideration
assumptions related to each business, using market available information as well as previous
performance. Discounted cash flows are estimated for a period of 5 to 10 years and perpetuity assuming
a real growth rate. Management considers appropriate to estimate cash flows for a period longer than 5
years as this reflects the estimated period for use of the asset groups and businesses involved.
The main assumptions used mainly consider the expected growth in operations based on Gross
Domestic Product (GDP) segmented and average growth experienced over the last few years other
macroeconomic aspects, as well as expectations of commodity sales price, using discount rates that
reflect specific risks related to the business.
Future cash flows are discounted using discount rates 13% (weighted average cost of capital) that
reflect specific risks relating to the significant assets in each cash-generating unit. A change of 0.5%
percentage point in the discount rate has an impact of about 10% on the estimated segments. The dollar
has no significant impact on the projections and therefore the fluctuation of the exchange would have
no significant effect on the estimated segments.
The impairment test performed as of December 31, 2016 did not result in the need to recognize
impairment losses on the carrying value of intangible assets or goodwill. The determination of the
recoverability of assets depends on certain key assumptions as described above which are influenced by
current market, technological and economic conditions. These tests are not indicative of future
impairment losses and/or whether they would be material.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
64
Intangible assets (excluding goodwill)
Annual rate of
amortization
December 31,
2016
December
31, 2015
Concession intangible asset - COMGÁS
Over the
concession term 8,240,521 8,237,379
Trademarks -
Mobil 10.00% 45,654 68,481
Comma - 24,204 24,204
69,858 92,685
Relationship with customers: -
Comgás 20.00% 233,971 313,693
Lubricants 6.00% 44,158 51,366
278,129 365,059
Other -
Licença de software 20.00% 120,835 112,570
Other 5,782 26,736
Discontinued operations (1,783) -
124,834 139,306
Total 8,713,342 8,834,429
19 Loans, borrowings and debentures Interest Parent Company Consolidated
Annual
interest(ii)
December
31, 2016
December
31, 2015
December
31, 2016
December
31, 2015
Description Index(i) Maturity
Loan and borrowings
BNDES TJ462 10.43% - - 651,371 809,660 Oct/2020
Selic 15.72% - - 313,395 298,258 Jun/2023
TJLP 9.92% - - 137,130 176,900 Jun/2023
EIB US$ + LIBOR 2.43% - - 612,961 869,014 Sep/2021
FINAME Fixed 5.50% - - 105 164 Sep/2018
FINEP Fixed 5.00% - - 109,233 137,133 Nov/2020
Foreign loans LIBOR Sterling 3.74% - - 218,232 312,940 Dec/2019
Perpetual Notes US$ 8.25% - - 1,650,089 1,976,673 -
Resolution 4131 US$ 4.79% - - 133,957 161,796 Oct/2020
US$ + LIBOR 2.40% - - 407,306 471,045 Mar/2018
US$ + LIBOR 3.13% - 406,348 32,798 406,348 Apr/2017
Senior Notes Due 2018 Fixed 9.50% - - 168,163 875,376 Mar/2018
Senior Notes Due 2023 US$ 5.00% - - 322,062 2,009,296 Jan/2023
Senior Notes Due 2027 US$ 7.00% - - 2,304,384 - Jan/2027
Working capital CDI + 0.28% p.m. 17.93% - - 9,988 25,004 Dec/2017
121.10% of CDI 17.36% - - - 10,143 -
Secured account 118% of CDI 17.39% - - 22,604 17,763 Mar/2017
FINIMP US$ + Libor Tri 3.37% - - 40,798 - Jun/2017
Other US$ + Libor Tri 3.91% - - 55,641 - Apr/2017
- 406,348 7,190,217 8,557,513
Non-convertible debentures - - 1,947,912 1,198,190
Total - 406,348 9,138,129 9,755,703
Current - 406,348 936,000 1,230,518
Non-current - - 8,202,129 8,525,185
(i) TJLP and URTJLP are long-term interest rates set on loans by BNDES, the (Brazilian National
Economic and Social Development Bank). Selic is the benchmark interest rate set by the Brazilian
Central Bank. CDI is a benchmark interbank lending rate in Brazil. IPCA is a benchmark consumer
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
65
price index; and
(ii) As at December 31, 2016.
The carrying amounts of the Company's loans and financing are denominated in these currencies:
12/31/2016 12/31/2015
Dólar (USD) 5,559,995 5,894,172
Reais (R$) 3,359,901 3,548,591
Libra Esterlina (GBP) 218,233 312,940
9,138,129 9,755,703
(i) On December 31, 2016, all dated debts denominated in US Dollars have currency risk protection
through derivatives (Note 32).
BNDES
Correspond to funds raised by its subsidiaries to finance projects to expand the gas distribution network,
expansion of the logistics segment and are allocated to investments in property, plant and equipment
and intangible assets. The agreements entered into have collateral from the Company, bank guarantees
and the transfer of fiduciary ownership of the assets described in the respective contracts.
BNDES financing has amortization of principal and payment of monthly interest, except for those that
are in grace period. For these loans, the guarantees offered are:
Project V - direct operation with BNDES: bank guarantee from Banco Itaú BBA for 100% of the
financing.
Project VI - direct operation with the BNDES: bank guarantee of the banks Bradesco (67.83%), Itaú
(14.56%) and Safra (17.61%).
Project VII - direct operation with BNDES: bank guarantee of Santander banks (39.69%), Sumitomo
(33.33%) and Safra (26.98%).
EIB – European Investment Bank
Refers to loans denominated in U.S. Dollars, bearing interest at LIBOR, maturing in 2021 and secured
by bank guarantees. The funds were used to expand and support the natural gas distribution network.
Cross-currency interest rate swaps have been entered into to mitigate the Company’s exposure to
interest rate and foreign exchange risks for 89% of CDI.
FINEP
In November 2012, Cosan Biomassa S.A. obtained a bank loan of R$ 89,694, maturing in January
2021. These loans are secured by bank guarantees. These funds will be used for the development,
production and marketing plan of new industrial technologies for the processing of biomass derived
from sugar cane or other sources.
Foreign currency loans
On December 22, 2014, Cosan Lubes Investment renegotiated its loan maturing in December 2019;
including the grace period for the principal amount of two and a half years. The original loan was
disbursed on June 29, 2012, for a principal amount of £ 54,000 thousand and was obtained in order to
acquire control of Comma Oil and Chemicals Limited in July 2012.
Perpetual Notes
On November 5, 2010 and July 13, 2011 Cosan Overseas Limited issued US$ 500,000 thousand of
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
66
perpetual notes in the international capital market under “Regulation S”, bearing annual interest of
8.25%, payable quarterly. Cross-currency interest rate swaps have been entered into to mitigate the
Company’s exposure to interest rate and foreign exchange risks.
Resolution 4,131
Refers to funds raised abroad with several financial institutions, maturing by 2020, aiming to finance
the Company's cash flow and controlled. To mitigate the risk of exchange and interest rate derivative
instruments were contracted whose interest rate was changed to 77.2% of the CDI.
Senior Notes Due in 2018
On March 19, 2013, the Company issued Senior Notes in the international capital market under
“Regulation S” and “Rule 144A” in the amount of R$ 850,000, bearing annual interest of 9.5%, payable
semiannually in September and March of each year.
Senior Notes Due in 2023
On March 14, 2013, the Company issued Senior Notes in the international capital market under
“Regulation S” and “Rule 144A” in the amount of US$ 500,000 thousand, bearing annual interest of
5%, payable semiannually in September and March of each year.
Senior Notes Due in 2027
On June 20, 2016, it was issued Senior Notes in the international market in accordance with the
"Regulation S" and "144A" in the amount of US$ 500 million, which are subject to interest at 7% p.a.
The funds were used for partial repayment of Senior Note 2018 and Senior Note 2023
On July 18, 2016 the Cosan Luxembourg S.A. ("Cosan Lux") issued an additional U.S.$150,000,000
principal amount of its 7% Senior Notes due 2027. The Bonds are additional securities issued pursuant
to the provisions of the indenture, dated as of June 20, 2016, among the Issuer, Cosan S.A. and
Deutsche Bank Trust Company Americas, as Trustee (the “Trustee”).
FINIMP
On July 1, 2016, the indirect subsidiary “Cosan Lubricants” contracted a loan "FINIMP" with Citibank
in the amount of US $ 12,345 at an interest rate of Libor 3M + 2.52% pa, maturing on 30 June 2017.
The funds were used to pay for raw materials imported.
Non-current loans have the following maturities:
December 31, 2016 December 31, 2016
13 to 24 months 1,466,631 628,853
25 to 36 months 660,387 2,181,646
37 to 48 months 768,126 670,499
49 to 60 months 207,663 727,953
61 to 72 months 151,689 184,070
73 to 84 months 1,110,467 120,819
85 to 96 months 60,961 2,010,345
Thereafter 3,776,205 2,001,000
8,202,129 8,525,185
Parent Company Consolidated
At December 31, 2015 406,348 9,755,703
Acquisition - 3,529,668
Payment (347,087) (3,776,679)
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
67
Monetary and exchange variations (59,261) (370,563)
At December 31, 2016 - 9,138,129
Debentures
Interest
Series
Quantity
Annual
interest
December
31, 2016
December
31, 2015 Description Issue Index
Non-convertible debentures
9/15/2013 3rd 1st 128,197 CDI 0.90% 133,465 133,624
9/15/2013 3rd 2nd 269,338 IPCA 5.10% 348,468 320,419
9/15/2013 3rd 3rd 142,465 IPCA 5.60% 184,349 166,300
Transaction cost 3rd (3,352) (4,750)
12/15/2015 4th 1st 269,620 IPCA 7.14% 288,988 270,642
12/15/2015 4th 2nd 242,374 IPCA 7.48% 259,820 243,308
12/15/2015 4th 3rd 79,900 IPCA 7.36% 85,647 80,207
Transaction cost 4th (9,502) (11,560)
12/28/2016 5th Only 675,000 IPCA 5.86% 669,357 -
Transaction cost 5th (9,328) -
1,947,912 1,198,190
Current 72,822 28,397
Non-current 1,875,090 1,169,793
1,947,912 1,198,190
3rd issue
Interest on the first series will be paid semi-annually in the months of March and September until the
end of the operation. Interest on the second and third series will be paid annually in the month of
September until the end of the operation.
The value of the principal and monetary restatement of the first series will be amortized over the
following years: 4th year (33.33%), 5th year (33.33%) and 6th year (33.34%). The value of the
principal and monetary restatement of the second series will be fully amortized at the end of the
operation that will occur on September 15, 2018.
The value of the principal and monetary restatement of the third series will be amortized in two
annual installments in the 6th (50%) and 7th (50%) years, being therefore the first payment due on
September 15, 2019 and the last payment due On September 15, 2020.
On December 31, 2016, the percentages for the fair value traded on the secondary market for the first
series were 100.09% of the unit price (PU) of the curve, for the second series 98.43% and for the third
series 99.99%.
4th issue
Interest on the first, second and third series will be paid annually in December until the end of the
operation.
The value of the principal and monetary restatement of the first series will be fully amortized at the
end of the operation that will occur on December 15, 2020.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
68
The value of the principal and monetary restatement of the second series will be amortized in two
annual installments in the 6th (50%) and 7th (50%) years, being therefore the first payment due on
December 15, 2021 and the last payment due On December 15, 2022.
The value of the principal and monetary restatement of the third series will be amortized over the
following years: 8th year (33.33%), 9th year (33.335%) and 10th year (33.335%).
On December 31, 2016, the percentages for fair value traded on the secondary market for the first
series were 104.32% of the unit price (PU) of the curve, for the second series 108.16% and for the
third series 109.72%.
5th issue
Interest on the single series will be paid annually in December until the end of the transaction.
The value of the principal and monetary restatement of the single series will be fully amortized at the
end of the operation that will occur on December 15, 2023.
As of December 31, 2016, the percentages for fair value traded on the secondary market for the single
series was 99.03% of the unit price (PU) of the curve.
(i) On December 31, 2016, all debts with defined maturities denominated in US dollars have exchange rate
risk protection through derivative financial instruments. See details in note 32.
Financial Covenants
The Company and its subsidiaries are subject to certain restrictive clauses in most of the loan and
financing agreements, based on certain financial and non-financial indicators.
Below are the financial covenants of debts and debentures open:
Loan Financial Covenant
BNDES
Not applicable
EIB loans FINEP
Foreign loans
Perpetual Notes FINIMP
Resolution 4131
Net debt / EBITDA not exceeding 3.75x
Short-term loans and total loans can not be greater than or equal to 0.55x
Senior Notes 2023
Net debt / EBITDA not higher than or equal to 3.5 Senior Notes 2018 Senior Notes 2027
Debentures 3º issue Onerous net debt / EBITDA not higher than or equal to 4x
Short-term Loan and total loan may not be greater than or equal to 0.6x
Debentures 4º issue Debentures 5º issue
As at December 31, 2016, the Company and its subsidiaries were in compliance with all debt financial
covenants.
20 Commitments
a) Commitments for the acquisition of assets and regulatory targets
In view of the postponement of the conclusion of the Review Five Year Tariff in 2014 as a result of the
publication of Resolutions ARSESP 493 and 494, both of May 27, 2014, which provide, respectively,
on the "Tariff Revision Process of Gas distribution companies in the State Sao Paulo, defining events
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
69
schedule "and on the" provisional adjustment of the sales margins of Gas Company of São Paulo -
COMGÁS "there Regulatory commitment set on December 31, 2016 and 2015.
b) Gas purchase
The subsidiary COMGÁS has contracts to purchase take-or-pay, effective until December 2019, with
gas suppliers that set minimum daily purchases of gas volumes. Was the Company to consume a
volume of gas under its contractual obligation, the company would have to pay the deficit between
consumption and the minimum required contractual volumes, however, could offset this credit (through
consumption) during the remainder of contract agreement. Amounts paid and not consumed by
COMGÁS were recognized as "Carriage Paid and not used" in the statement of financial position
(2015 R$ 244,006; 2015 R$ 204,725).
c) Asset (liability) regulatory - supplementary information
On December 31, 2016, the subsidiary COMGÁS has a current regulatory balance payable in the
amount of R$ (414,011) (R$ 116,947 on December 31, 2015 to be received) related to differences
between the actual cost of the gas incurred, Paid by COMGÁS, and the cost of gas included in the tariff
and charged to customers according to the tariff structure defined by ARSESP. During the year, the net
current account flow was R$ (530,958) and the Selic rate adjustment was R$ (30,763).
December 31,
2016
December 31,
2015
Cost of gas to be recovered/(transferred) (394,552) 114,076
Credits of taxes to be recovered/(transferred) (24,061) (3,910)
Adjustment to present value of taxes 1,592 192
Other 3,010 6,589
(414,011) 116,947
Opening balance 116,947 242,654
Closing balance (414,011) 116,947
Expense not recognized in the statement of
income before income tax and social contribution (530,958) (125,707)
Regulatory assets (liabilities) (476,822) (145,545)
Adjustment (30,763) 26,111
Extemporaneous credit (7,277) -
Other (16,096) (6,273)
(530,958) (125,707)
The tariffs for the gas supply to the different customer segments are authorized by the regulator.
According to the terms of the Concession Agreement, the difference between the cost of gas
component included in the rates charged to customers and the actual cost incurred gas are calculated on
a monthly basis and debited or credited to a regulatory account (current account regulatory).
Periodically, charges or credits in tariffs are determined by the regulator in order to pay off the
accumulated amount in this account.
The balance of this account is considered as an asset or liability in accordance with the regulatory chart
of accounts. However, this account is excluded from the financial statements prepared in accordance
with accounting practices adopted in Brazil, since its balance is not recorded as an asset or a liability,
because their realization or settlement depends on future consumption by different consumers of the
Company. Therefore, the balances presented above are not recognized in the financial statements
presented here.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
70
21 Trade payables
Parent company Consolidated
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Natural gas suppliers - - 1,377,528 1,489,552
Judicial deposits (i) - - (294,976) (294,976)
Material and services suppliers 3,330 1,151 385,018 350,246
3,330 1,151 1,467,570 1,544,822
(i) On December 31, 2016, the balance of judicial discussion due to the fact of Petrobras is practicing
different prices comparing to the market in gas supply is R$ 1,045,311, being the amount secured by
judicial deposit R$ 294,976 and the amount guaranteed by bail R$ 750,335.
22 Other taxes payable Parent Company Consolidated
December 31,
2016
December 31,
2015
(restated)
December 31,
2016
December 31,
2015
(restated)
Tax amnesty and refinancing program - Refis 191,856 184,275 191,856 184,275
COFINS - Revenue tax 21,568 11,905 48,181 20,815
PIS - Revenue tax 4,512 2,510 10,230 4,432
INSS - Social security 725 539 1,103 782
Other 492 508 30,612 17,215
ICMS – State VAT 1 4 82,293 71,438
219,154 199,741 364,275 298,957
Current 82,434 21,025 227,555 120,241
Non-Current 136,720 178,716 136,720 178,716
(i) On December 31, 2016, the Company recognized the amount of R$ 12,962 (R$ 153,486 on December
31, 2016) related to installments of tax debts (REFIS) related to the IAA (Instituto do açúcar e álcool),
INSS and other taxes
The amounts due on non-current liabilities present the following maturity schedule:
Parent company Consolidated
December 31,
2016
December 31, 2015
(restated)
December 31,
2016
December 31, 2015
(restated)
13 a 24 months 13,111 11,561 13,111 11,561
25 a 36 months 11,302 11,561 11,302 11,561
37 a 48 months 10,699 11,561 10,699 11,561
49 a 60 months 10,699 11,561 10,699 11,561
61 a 72 months 10,699 11,561 10,699 11,561
73 a 84 months 10,699 11,561 10,699 11,561
85 a 96 months 10,325 11,561 10,325 11,561
Thereafter 59,186 97,789 59,186 97,789
136,720 178,716 136,720 178,716
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
71
23 Income tax and social contribution
a) Reconciliation of income and social contribution tax expenses
Parent company
December 31, 2016
December 31, 2015
(restated)
Profit (loss) before taxes 754,717 280,848
Income tax and social contribution at
nominal rate (34%) (256,604) (95,488)
Adjustments to determine the effective rate
Equity method investments (non taxable income) 601,012 322,400
Non-deductible expenses (donations, gifts, etc.) (772) (857)
Stock options (2,844) (3,835)
Interest capital - benefit (34,728) (37,544)
Out of period carryforward
tax losses (reversals) 40,252 -
Differences in tax rates on earnings / losses
of overseas companies (38) (33,588)
Compensation action
Other (7,300) (5,612)
Income tax and social contribution
expense (current and deferred) 357,425 260,320
Consolidated
December 31, 2016
December 31, 2015
(restated)
Profit (loss) before taxes 1,485,562 695,677
Income tax and social contribution
at nominal rate (34%) (505,091) (236,530)
Adjustments to determine the effective rate
Equity method investments (non taxable income) 529,486 235,273
Non-deductible expenses (donations, gifts, etc.) (24,760) (22,529)
Stock options (2,844) (3,835)
Interest capital - benefit (45,573) (10,375)
Out of period carryforward -
tax losses (reversals) 39,555 1,586
Differences in tax rates on earnings / losses
of overseas companies (53,199) 11,321
Differences in tax rates on entities
under Brazilian presumed profits tax regime 14 12
Compensation action 18,447 114,844
Other (16,248) (4,549)
Income tax and social contribution
expense (current and deferred) (60,213) 85,218
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
72
b) Deferred income tax assets and liabilities
Parent Company
December 31, 2016 December
31, 2015
(restated) Base IRPJ CSLL Total
Tax loss carryforwards:
Income tax loss carryforwards 780,847 195,212 - 195,212 120,391
Social contribution tax loss carryforwards 792,270 - 71,304 71,304 44,369
Temporary differences: - - - - -
Foreign currency gains/losses 1,576,082 394,021 141,847 535,868 775,033
Tax deductible goodwill (64,185) (16,046) (5,777) (21,823) (21,823)
Provision for judicial demands 216,654 54,164 19,499 73,663 60,288
Other losses 183,801 45,950 16,542 62,492 7,107
Profit sharing 13,639 3,410 1,228 4,638 4,612
Derivatives instruments unrealized gains (6,154) (1,539) (554) (2,093) (413,686)
Other temporary differences 11,010 2,752 991 3,743 6,457
Gain on formation of Joint Venture (3,338,342) (834,586) (300,451) (1,135,037) (1,135,037)
Other 644,178 161,045 57,975 219,020 132,998
Total net liability 4,383 2,604 6,987 (419,291)
Deferred income tax – Assets 6,987 -
Deferred income tax – Liabilities - (419,291)
Total net deferred taxes 6,987 (419,291)
Consolidated
December 31, 2016 December
31, 2015
(restated) Base IRPJ CSLL Total
Tax loss carryforwards:
Income tax loss carryforwards 1,584,724 396,181 - 396,181 311,140
Social contribution tax loss carryforwards 1,603,365 - 144,303 144,303 113,688
Temporary differences: - - - - -
Foreign currency gains/losses 1,735,622 433,906 156,206 590,112 891,270
Tax deductible goodwill (258,251) (64,563) (23,243) (87,806) 101,293
Provision for judicial demands 556,897 139,224 50,121 189,345 164,177
Other losses 342,114 85,528 30,790 116,318 60,229
Profit sharing 33,304 8,326 2,997 11,323 6,790
Derivatives instruments unrealized gains 95 24 9 33 (435,946)
Other temporary differences 340,690 85,173 30,662 115,835 100,670
Review of useful life (789,539) (197,385) (71,058) (268,443) (100,153)
Gain on formation of Joint Venture (3,338,342) (834,586) (300,451) (1,135,037) (1,135,037)
Unrealized gains on investment properties - - - - (62,069)
Assets held for sale - - - - (1,255)
Intangible - Concession contract (31,225) (7,806) (2,810) (10,616) (12,552)
Regulatory asset 208,939 52,235 18,804 71,039 76,764
Gains or losses on actuarial liabilities 407,808 101,952 36,703 138,655 103,820
Business combination - Property and equipment (3,487,292) (871,823) (313,856) (1,185,679) (1,234,094)
Business combination – Other fair value adjustments (124,589) (31,147) (11,213) (42,360) (66,404)
Other 524,301 131,075 47,187 178,261 84,839
Total net liability (573,686) (204,849) (778,536) (1,032,830)
Deferred income tax – Assets 330,212 335,808
Deferred income tax – Liabilities (1,108,748) (1,368,638)
Total net deferred taxes (778,536) (1,032,830)
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
73
c) Changes in deferred income taxes, net
Parent company Consolidated
December 31, 2015 (419,291) (1,032,830)
Deferred taxes recognized in the
period result 372,433 52,420
Others comprehensive income - 28,986
Cost of issuance of preferred shares in - (4,864)
Partial Spin-off 53,845 158,164
Other - 19,588
December 31, 2016 6,987 (778,536)
d) Recoverability of deferred income tax and social contribution
In assessing the recoverability of deferred taxes, management considers the projections of future taxable
income and the movements of temporary differences. When it is more probable that part or all of the
taxes will not be realized, a provision for non-realization is constituted. In the year ended December 31,
2016, no provision was recognized. There is no validity period for the use of tax loss carryforwards and
negative bases, but the use of these accumulated losses of previous years is limited to 30% of annual
taxable profits.
24 Provision for legal proceedings Provision for legal proceedings
Parent company Consolidated
December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015
Tax 85,658 73,320 405,060 376,532
Civil 67,426 57,542 189,861 161,740
Labor 134,212 135,678 166,621 165,075
287,296 266,540 761,542 703,347
The judicial deposits at December 31, 2016 are as follows:
Judicial deposit
Parent company Consolidated
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Tax 226,558 212,119 350,745 353,961
Civil and environmental 14,200 13,797 19,849 19,465
Labor 29,170 26,597 43,620 39,641
269,928 252,513 414,214 413,067
Changes in provision for judicial demands:
Parent company
Tax Civil Labor Total
At December 31, 2015 73,320 57,542 135,678 266,540
Provisions 5,390 19,174 31,134 55,698
Settlement / Write-offs (1,570) (23,896) (48,949) (74,415)
Monetary variation 8,518 14,606 16,349 39,473
At December 31, 2016 85,658 67,426 134,212 287,296
Consolidated
Tax Civil Labor Total
At December 31, 2015 376,532 161,740 165,075 703,347
Provisions 6,631 23,674 41,817 72,122
Settlement / Write-offs (4,168) (26,413) (57,205) (87,786)
Monetary variation 26,065 30,860 16,934 73,859
At December 31, 2016 405,060 189,861 166,621 761,542
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
74
a) Tax
The main tax lawsuits at December 31, 2016, are as follows:
Parent company Consolidated
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Compensation with FINSOCIAL (i) - - 269,275 255,022
INSS (ii) 53,255 48,884 63,103 57,916
ICMS credits (iii) 22,253 18,777 31,517 29,248
PIS and COFINS 202 - 334 -
IPI 1,155 1,105 1,155 1,105
IRPJ and CSLL 329 329 329 329
Others 8,464 4,225 39,347 32,912
85,658 73,320 405,060 376,532
(i) During the period from October 2003 to November 2006 the subsidiary Cosan Lubrificantes e
Especialidades offset the FINSOCIAL tax against several other federal taxes, based on a final court
decision in September 2003 following a decision that challenged the constitutionality of the
FINSOCIAL. No judicial deposits were made for these processes.
(ii) It mainly includes amounts related to social security contributions levied on income, pursuant to art. 22a
of Law 8,212/91, whose constitutionality is being challenged in court. Judicial deposits have been made
for the corresponding amount.
(iii) A considerable portion of the amount accrued as ICMS was paid in cash under the provisions of Decree
Nº 58,811 issued on December 27, 2012, which established the State of São Paulo Special Installment
Program of ICMS (a.k.a. PEP-ICMS). The amounts that have been provisioned refer to tax assessments
by the tax authorities related to several types of ICMS credits. Amongst them: (a) assessment notice
related to ICMS payments in the purchase of raw materials which are considered for “use and
consumption”, therefore, not eligible for compensation, (b) Assessment, as solidary debtor, for
disregarding withholding obligations of ICMS taxes in relation to a tolling agreement, arising from an
agricultural partnership signed between the Company‟s sugarcane plants and Central Paulista Ltda.
Açúcar and Álcool.
b) Civil and labor
The Company and its subsidiaries are parties to civil proceedings relating to (i) compensation for
material and moral damage, (ii) public civil actions for abstaining from straw burning sugarcane and
(iii) execution of an environmental nature.
The Company and its subsidiaries are parties to labor lawsuits filed by former employees and
employees of service providers who question, among others, joint and several liability, overtime and
reflex payments, intrajornate interval, additional hazardous and unhealthy, prior notice, Differences in
FGTS, hours in itinere, 13th salary, vacation plus one third, additional night, indemnity for moral
damages and materials resulting from work accident and / or occupational disease, obligation to do or
not to comply with regulatory standards of the MTE, Collective moral damages, repayment of
discounts made on payroll, such as confederation contribution, union tax and others..
Contingencies - Lawsuits considered as possible losses therefore not provided
a) Tax
The main tax lawsuits whose probability of losses are possible and therefore no provision has been
recognized in the financial statements are highlighted below:
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
75
Parent company Consolidated
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
ICMS- state VAT 1,498,703 1,348,914 1,828,663 1,678,491
Federal income taxes (i) 462,596 323,929 1,904,333 820,972
PIS and COFINS - revenue taxes 792,998 708,141 808,498 733,799
IRRF - Whithholding tax 2,674 2,551 793,149 729,070
INSS - social security 567,640 541,700 615,403 577,686
IPI - Excise tax 436,507 423,246 512,209 484,606
Compensation with IPI - IN 67/98 128,456 123,522 128,456 123,522
Other 548,742 524,031 790,390 768,728
4,438,316 3,996,034 7,381,101 5,916,874
(i) State VAT: Refers mainly to (i) Tax assessments filed against the Company for unpaid ICMS and non-
compliance with accessory obligations, in connection with the partnership and manufacturing upon
demand, with Central Paulista Açúcar e Álcool Ltda., between May to December 2006 and May to
December 2007, (ii) ICMS levied on the remittances for the export of crystallized sugar, which the
Company understands are tax exempted. However, the tax authorities, classify crystallized sugar as a
semi-finished product therefore, subject to ICMS taxation and (iii) Penalties related to the withholding
of ICMS taxes on the sale of ethanol to customers residing in other states, (iv) ICMS withholdings rate
differences on the sale of ethanol to companies located in other states, which subsequently had their tax
registrations revoked, and (v) disallowance of ICMS tax credits in the sale of diesel fuel to customers
engaged in the agroindustrial business. The State Tax Administration understands that because the
diesel fuel sold is for agricultural use, which is not Company‟s core business, ICMS cannot be
compensated and (e) ICMS payments on inventory differences arising from erroneous calculations by
the State Tax Administration; e (f) requirement of ICMS due to disallowance of credits originating
goods of takeovers that after the operations, had their registrations revoked. It turns out that the state tax
authorities, despite the company's good faith proven, dismissed the existing evidence and declared
retroactively, the unsuitability of the corresponding invoices, contrary to the Supreme Court Precedent
509.
(ii) (a) The Company, through its subsidiary Comgás, has a tax assessment notice related to the deduction
of the amortization of goodwill expense, the possible amount is R$ 618,992. (B) The Company has a
tax assessment notice related to the deduction of goodwill amortization deductions for calendar years
2011 to 2012, the possible amount is R$ 93,164. (C) The Company has a tax assessment notice related
to exchange variation and interest incurred as the tax authorities understand that the corporate
transactions carried out were intended to postpone the settlement of debt contracted abroad through the
issuance of Perpetual Bonds, in order to reduce positive result of exchange variation, the possible
amount of which is R$ 76,369. The three notices of infraction are being questioned at the
administrative level. (D) The subsidiary Cosan Lubrificantes has an assessment notice drawn up for
collection of IRPJ and CSLL for the 2011 and 2012 calculation period, by excluding net income for the
period, referring to the amortization of goodwill on the acquisition of investments valued by
shareholders' equity, which amount Possible is R$ 178,363. This goodwill is the responsibility of the
subsidiary Cosan Lubrificantes and was contributed to Raízen Combustíveis, and the assessment was a
reflection of the assessment related to the period from 2009 to 2011.
(iii) Refers mainly to the reversal of PIS and COFINS credits, provided by Laws 10.637/2002 and
10.833/2003, respectively. Those reversals arise from a differing interpretation of the laws by the tax
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
76
authorities in relation to raw materials. These discussions are still at the administrative level. There are
also questions regarding the constitutionality of broadening the base of the PIS / COFINS conveyed by
Law 9.718/98. The Supreme Court has already ruled on this issue, judging it unconstitutional.
(iv) IRRF: In June 2013, the Company received an assessment notice issued for the payment of income tax
withheld at source (in Portuguese "IRRF") in the amount of R$ 833,851. It was allocated to the
Company's liability for the IRRF, as the tax payer, due to a result of an alleged capital gain arising from
the acquisition of assets of companies located abroad. Company is challenging this tax assessment at the
administrative level and, together with its legal advisors classified the chances of loss as possible the
amount of R$ 617,995. But the amount of R$ 216,855 on the part of the fine, is classified as remote.
(v) The possible lawsuits related to INSS essentially involve: (a) The question of the legality and
constitutionality of Instruction MPS / SRP No. 03 of 2005, which restricted the constitutional immunity
of social security contributions on income from exports exclusively to direct sales, through to tax
exports made through trading companies or trading companies; (B) contribution requirement under
SENAR (National Rural Education Service) in direct and indirect export operations in the tax authority
understands that no constitutional right to immunity; (C) contribution payment requirement security on
retail goods in the internal market and for third parties, which are not included in the computation of the
pension contribution tax basis, which focuses only on the gross revenue from the actual production of
the property and not the goods.
(vi) The IPI for contingencies are related mainly to the SRF Normative Instruction No. 67/98, by which was
co-validated the procedure adopted by industrial establishments which outputs without launching and
recovery of IPI, related to transactions with sugar sugarcane demerara type, superior crystal, special
glass, extra special crystal and refined granulated, practiced in the period from 6 July 1995 to 16
November 1997 and refined sugar amorphous type, between 14 January 1992 to November 16, 1997.
(vii) Compensation by IPI credit - IN 67/98. SRF Normative Instruction No. 67/98 brought the possibility of
the return of IPI amounts paid in the period from January 14, 1992 to November 16, 1997, on the
refined sugar amorphous type. Therefore, the Company for the periods that payments had been made,
pleaded to offset these amounts against other taxes due. However, requests for restitution and
compensation, were rejected by the Federal Revenue Service, giving rise to questions at the
administrative level.
b) Civel and labor
Parent company Consolidated
December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015
Civil 592,223 522,973 1,318,404 1,132,962
Labor 348,727 368,506 376,146 398,242
940,950 891,479 1,694,550 1,531,204
Receivables from legal proceedings
The Company recognized a gain of R$ 69,951 in December 2013 and R$ 318,358 in 2007,
corresponding to a lawsuit filed against the Federal Government, claiming indemnification for the
pricing of products, at the time when the industry was subject to government price control. Final
judgment was passed in favor of the Company. A gain was recognized in profit or loss of the
corresponding year, with a corresponding receivable in “Other non-current assets”.
On December 31, 2016, there was a credit assignment to third party in the amount of R$ 233,570 (net
lawyer fees) related to credit previously recorded on December 31,2015 in the amount of R$ 290,180 (
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
77
net of legal fees provision) , the same matter of the actions described above. The Company recorded in
“Other operating income (expense), net” the amount of R$ 45,625 related to financial discount on this
operation (Nota 31).
At December 31, 2016, the asset recorded for the indemnity lawsuit and corresponding provision for
legal fees totaled R$ 480,723 and R$ 59,678 respectively (R$ 830,461 and R$ 113,944 as at December
31, 2015)m in the line of “other assets” and “other liabilities” respectively
The Company has additional claims to those mentioned above, which, because they are considered
probable, were not recorded because they represent contingent assets.
25 Preferred shareholders payable in subsidiaries
The Company contributed all of its common shares issued by Raízen Energia SA and Raízen
Combustíveis SA and debts, net of financial resources, in the amount of R$ 1,979,519, represented by
debentures and working capital, to the subsidiary Cosan Investimentos Investments.
On June 27, 2014, the Company executed an Investment Agreement with Fundo de Investimentos em
Participações Multisetorial Plus II (“FIP Multisetorial”) and with Razac Fundo de Investimentos em
Participações (“FIP Razac”). Pursuant to this agreement, FIP Multisetorial and FIP Razac subscribed
and paid-in R$ 2,000,000 of non-voting preferred shares issued by Cosan Investimentos e Participações
S.A..
The financial liability will be measured taking into account the "debit balance" of the initial
contribution plus the financial update less dividends paid (also updated). The Company will be required
to pay the Investors if they exercise the option to sell the investment in 2021.
26 Shareholders´ equity
a. Common stock
Subscribed and fully paid capital as of R$ 3,824,648 and R$ 3,822,725 represented by 407,294,353
407,214,353 common shares at December 31, 2016 and 2015 book entry and without par value.
The authorized common stock may be increased up to the limit of R$ 6,000,000, regardless of
statutory, by resolution of the Board of Directors, who have the power to fix the number of shares to be
issued, the issue price and other conditions of subscription and payment of shares within the authorized
capital.
b. Legal reserve
In the year ended December 31, 2016, a legal reserve on the net income for the same period was not
constituted due to an excess of 30% of the stockholders' equity balances, pursuant to art. 193 of the
corporation law.
c. Statutory reserve
The Statutory reserve aims to strengthen the working capital to finance the maintenance, expansion and
development of the activities that make up the objects of the Company and / or its subsidiaries.
This special reserve shall be composed of up to 75% of net income for each period performed after the
other profit reserves and up to the limit of 100% of the common stock.
d. Dividends
On February 18, 2016 and May, 12 2016, the Board of Directors approved the payment of the
Company's interim dividends in the amount of R$ 285,000 (two hundred eighty-five million reais) and
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
78
290,000 (two hundred ninety million reais), R$ 300,000 (three hundred million reais) in accordance
with Article 31 of the Company's bylaws, respectively, already settled.
The dividends, the allocation of net income for the year and excess of profit reserves, as Determined in
art. 199 of the Spanish Corporations Law will be subject to deliberations in the next Ordinary General
Meeting to be held until April 30, 2017.
December 31, 2016
Profit for the year 1,036,085
Legal reserve – 5% -
Calculation basis for dividend distribution 1,036,085
Minimum mandatory dividends – 25% (259,020)
Excess Dividends (130,980)
Retained Earnings 646,085
Change in dividends payable
Balance as of December 31, 2015 23,422
Interim Dividends Current Year 476,686
Dividends for the year 390,000
Dividends paid (866,834)
Balance as of December 31, 2016 23,274
e. Unrealized profit reserve
The Unrealized Profit Reserve was established in the year ended March 31, 2012 when the amount of
the mandatory dividend, calculated under art. 202 of Law no. 6.404/76, as amended, exceeds the
realized portion of net income, which was obtained by the net income for that year reduced by the (i)
net profit of equity and (ii) the profits, income or net gain on operations assets and liabilities at market
value, the period of realization will occur in the next financial year.
f. Share repurchase program
On June 11, 2013, the Board of Directors approved the repurchase of shares of the Company to be held
in treasury, canceled or sold. The deadline for completion of the transaction is 365 days and the
maximum shares that can be repurchased in the period was 4,600,000 common shares (representing
1.129626% of the total number of shares).
On December 21, 2016, the Board of Directors approved the renewal of the Repurchase Program of
common shares issued by it. The transactions can be carried out until December 21, 2017 and the
maximum number of shares that can be repurchased is 4,000,000 common shares (representing
0.98209071% of the total number of shares).
In the year ended December 31, 2016, there was no repurchase of common shares.
At December 31, 2016, the Company had 29,539 treasury shares (1,357,539 common shares as of
December 31, 2015), whose market price was R$ 38.15 (R$ 25.20 as of December 31, 2015).
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
79
g. Other comprehensive income
Comprehensive income
December
31, 2015 Base
Deferred
tax Net
December
31, 2016
Foreign currency translation differences -
equity - accounted investee (80,378) 72,399 -
72,399 (7,979)
Gain (loss) on cash flow hedge (235,891) 46,605 - 46,605 (189,286)
Realization of investment property
reclassified from property, plant and
equipment
190,735 (190,735) -
(190,735) -
Defined benefit plan actuarial gain (losses) 4,396 (85,621) 28,988 (56,633) (52,237)
Gain in mensuration on derivative financial
instrument (60,631) 6,000 -
6,000 (54,631)
Available for sale financial assets from
securities 30,739 (9,361) -
(9,361) 21,378
Total (151,030) (160,713) 28,988 (131,725) (282,755)
Attributable to:
Owner of the Cosan (184,691) (111,232) (295,923)
Non-controlling interests 33,661 (20,493) 13,168
Comprehensive income
December
31, 2014 Base
Deferred
tax Net
December
31, 2015
Foreign currency translation differences -
equity - accounted investee (23,593) (56,785) - (56,785)
(80,378)
Gain (loss) on cash flow hedge (10,686) (224,875) (330) (225,205) (235,891)
Revaluation of investment property
reclassified from property, plant and
equipment 190,735 - -
-
190,735
Defined benefit plan actuarial losses 23,467 (28,895) 9,824 (19,071) 4,396
Loss on measurement of derivative financial
instrument - (91,867) 31,236 (60,631)
(60,631)
Available for sale financial assets from
securities 22,572 12,374 (4,207) 8,167
30,739
Total 202,495 (390,048) 36,523 (353,525) (151,030)
Attributable to:
Owner of the Cosan 175,298 (359,989) (184,691)
Non-controlling interests 27,197 6,464 33,661
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
80
27 Earnings per share
The calculation of basic earnings per share was done by dividing the profit attributable to owners of the
parent by the weighted average number of common shares outstanding during the year excluding
ordinary shares purchased by the Company and held as treasury shares (note 26).
The Company's subsidiaries have two categories of dilution effects: stock options and put options. For
stock options, a calculation is made to determine the effect of dilution on the profit attributable to
shareholders of the parent, due to the exercise of the stock options of the subsidiaries. For the put
option, it is assumed to have been converted into common shares, and the profit attributable to the
shareholders of the parent company is adjusted.
The following table sets forth the calculation of earnings per share for the years ended December 31,
2016 and 2015 (in thousands, except per share amounts):
December 31, 2016
December 31, 2015
(restated)
Profit attributable from continued operation to ordinary
equity holders for basic earnings 1,112,141 541,168
Profit attributable from discontinued operation
to ordinary equity holders for basic earnings (76,057) 38,915
Effect of dillution:
Put oprion (6,371) -
Profit from continued operation attributable to
ordinary equity holders adjusted for
the effect of dilution 1,105,770 541,168
Profit from discontinued operation attributable to
ordinary equity holders adjusted for
the effect of dilution (76,057) 38,915
Weighted average
number of shares outstanding - basic 406,274,029 405,856,814
Effect of dilution:
Stock option 1,715,167 364,204
Put option 5,880,423 10,833,264
Weighted average number of
shares outstanding - diluted 413,869,619 417,054,282
Basic earnings per share R$2.73742 R$1.33340
Basic earnings per share from descontinued operation (R$0.18721) R$0.09588
Diluted earnings per share R$2.67179 R$1.29760
Diluted earnings per share from descontinued operation (R$0.18377) R$0.09331
28 Net sales
Consolidated
December 31, 2016
December 31, 2015
(restated)
Gross revenue from sales of products and services 9,215,080 10,016,331
Construction revenue 339,025 408,086
Indirect taxes and deductions (2,012,312) (2,075,236)
Net revenue 7,541,793 8,349,181
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
81
29 Expenses by nature
The expenses are presented in the statement of profit and loss by function. The reconciliation of
income by nature/purpose for the year ended December 31, 2016, and 2015 are as follows:
Parent company Consolidated
December 31,
2016
December 31,
2015 (restated)
December 31,
2016
December 31,
2015 (restated)
Raw materials - - (4,184,448) (5,217,777)
Cost of construction - ICPC 01 - - (339,025) (643,760)
Employee benefit expense (100,367) (96,573) (814,217) (519,154)
Commercial expenses - - (72,683) (65,096)
Transportation expenses - - (76,278) (279,347)
Depreciation and amortization (6,571) (4,036) (577,964) (512,488)
Other expenses (27,995) (25,621) (125,295) (151,989)
(134,933) (126,230) (6,189,910) (7,389,611)
Cost of sales - - (4,586,552) (5,905,340)
Selling - - (1,032,893) (919,166)
General and administrative (134,933) (126,230) (570,465) (565,105)
(134,933) (126,230) (6,189,910) (7,389,611)
30 Other (expense) income, net
Parent company
December 31, 2016
December 31, 2015
(restated)
Gain on compensation claims - 345,193
Provisions for legal proceedings and recovery taxes
program (ii) (89,661) (16,801)
Costs to operation transactions - (141,988)
Other 3,640 23,125
(86,021) 209,529
Consolidated
December 31, 2016
December 31, 2015
(restated)
Gain on compensation claims - 345,193
Provisions for legal proceedings and recovery taxes program (92,359) (25,168)
Inventories adjustment expense (15,459) -
Profit on disposal of non-current assets (13,779) (6,136)
Costs to operation transactions - (141,988)
Other 5,833 20,119
(115,764) 192,020
(i) Value related to costs incurred by the Company with lawyers, consultants, business
consultants and other related services for corporate reorganizations.
(ii) The amount is also composed by the adjustment according to the note 2.5.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
82
31 Financial results
Parent Company
December 31, 2016 December 31, 2015
Cost of gross debt
Interest on debt (10,714) (20,997)
Monetary and exchange rate variation 55,170 (124,978)
Derivative and fair value (i)
(758,157) 1,240,116
Amortization of borrowing costs (4,850) -
(718,551) 1,094,141
Income from financial investment 82,749 33,282
82,749 33,282
Cost of debt, net (635,802) 1,127,423
Other charges and monetary variations
Interest on other receivables 87,400 54,870
Other financial assets variation 18,827 -
Interest on capital 188,052 -
Interest on other liabilities (403,741) (330,857)
Bank charges (108,753) (13,587)
Exchange variation 62,005 (1,588,536)
(156,210) (1,878,110)
Financial results, net (792,012) (750,687)
Conciliation
Financial expenses (744,408) (598,774)
Financial income 384,590 226,167
Exchange variation 828,401 (1,618,196)
Derivatives (1,260,595) 1,240,116
Financial results, net (792,012) (750,687)
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
83
Consolidated
December 31, 2016 December 31, 2015
Cost of gross debt
Interest on debt (732,591) (572,655)
Monetary and exchange rate variation 992,534 (1,511,088)
Derivative and fair value (i)
(1,369,944) 1,095,188
Amortization of borrowing costs (73,832) -
Discounts obtained from financial operations 85,962 -
Guarantees and warranties on debt (50,819) (23,708)
(1,148,690) (1,012,263)
Income from financial investment 335,642 232,280
335,642 232,280
Cost of debt, net (813,048) (779,983)
Other charges and monetary variations
Interest on other receivables 181,521 118,869
Interest on capital 18,827 -
Interest on other liabilities (570,691) (478,082)
Bank charges (116,719) (50,123)
Exchange variation (7,759) 41,427
(494,821) (367,909)
Financial results, net (1,307,869) (1,147,892)
Conciliation
Financial expenses (1,720,365) (1,395,741)
Financial income 799,912 411,838
Exchange variation 1,001,581 (623,164)
Derivatives (1,388,997) 459,175
Financial results, net (1,307,869) (1,147,892)
(i) The balances of fair value of derivatives that were presented under interest and monetary
variation on December 31, 2015 were relocated to the caption derivatives and fair value for
better presentation of this financial information. The impact of reallocating the number of
December 31, 2015 was R$ 27,163.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
84
32 Financial instruments
Financial risk management
Overview
The Company is exposed to the following risks related to the use of financial instruments:
Credit risk;
Liquidity risk; and
Market risk
This note presents information about the exposure of the Company and its subsidiaries to the above
risks, as well as the objectives of the Company's risk management policies, these policy and processes
for the assessment and management of risks.
The carrying amount of financial assets and financial liabilities are as follows:
December 31, 2016
December 31, 2015
Assets
Fair value through profit or loss
Exclusive funds 3,203,907 2,185,352
Investment securities 371,167 97,222
Other financial assets 70,487 144,208
Financial intrument derivative 747,411 2,292,859
4,392,972 4,719,641
Loans and receivables
Cash and cash equivalents 787,023 944,178
Trade receivables 753,969 799,307
Receivables from related parties 259,110 307,945
Dividends receivable 142,856 11,321
1,942,958 2,062,751
Total 6,335,930 6,782,392
Liabilities
Liabilities amortized cost
Loans, borrowings and debentures 5,324,662 5,353,958
Trade payables 1,467,570 1,544,822
Payables to related parties 150,107 114,559
Dividends payable 94,055 41,656
Tax installments - REFIS 191,856 184,275
Preferred shareholders payable in subsidiaries 1,769,427 2,042,878
Other financial liabilities 25,734 -
Other 137,544 147,224
9,160,955 9,429,372
Fair value through profit or loss
Loans, borrowings and debentures 3,813,467 4,401,745
Contingent consideration 166,807 217,377
Pension and post-employment benefits 441,480 344,334
Derivative financial instruments 283,541 740,718
4,705,295 5,704,174
13,866,250 15,133,546
Risk management structure
As at December 31, 2016 and 2015, the fair values relating to transactions involving derivative financial
instruments to protect the Company’s risk exposure were using observable inputs such as quoted prices
in active markets, or discounted cash flows based on market curves, and are presented below:
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
85
Notional Fair value
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Exchange rate derivatives
Forward agreements 438,689 2,058,190 (14,983) 46,200
438,689 2,058,190 (14,983) 46,200
Interest rate and exchange rate risk
Swap agreements (interest rate) 1,816,934 900,634 113,125 (69,964)
Cross currency interest rate swaps 4,315,575 3,889,822 365,728 1,575,905
6,132,509 4,790,456 478,853 1,505,941
Total financial instruments 463,870 1,552,141
Assets 747,411 2,292,859
Liabilities (283,541) (740,718)
Credit risk
December 31, 2016
December 31, 2015
Cash and cash equivalents(i) 3,990,930 3,129,530
Trade receivables 753,969 799,307
Derivative financial instruments 747,411 2,292,859
Investment securities 371,167 97,222
Other financial assets 70,487 144,208
Dividends receivable 142,856 11,321
6,076,820 6,474,447
(i) The Company held cash and cash equivalents of R$ 4,362,07 at December 31, 2016 (R$ 3,226,752 as at
December 31, 2015). The cash and cash equivalents are held with bank and financial institution
counterparties, which are rated AA to A.
The credit risk on cash and cash equivalents, marketable securities, other financial assets and derivative
financial instruments are determined by rating instruments widely accepted by the market and are
arranged as follows:
December 31, 2016 December 31, 2015
AAA - 1,116,836
AA 4,124,002 3,701,377
A 725,208 297,761
BBB 260,298 542,706
5,109,508 5,658,680
(ii) Customer credit risk is managed by each business unit subject to the Company’s established policy,
procedures and control relating to customer credit risk management. Credit quality of the customer is
assessed based on an extensive credit rating scorecard and individual credit limits are defined in
accordance with this assessment. Outstanding customer receivables are regularly monitored and any
shipments to major customers are generally covered by letters of credit or other forms of credit
insurance.
The need for a provision for impairment is analyzed on each date reported on an individual basis to key
customers. In addition, a large number of accounts receivable with smaller balances are grouped into
homogeneous groups and, in such cases, the recoverable loss is evaluated collectively. The calculation
is based on actual historical data.
Credit risk from balances with banks and financial institutions is managed by the Company’s treasury
department in accordance with the Company’s policy. Investments of surplus funds are made only with
approved counterparties and within credit limits assigned to each counterparty. Counterparty credit
limits are reviewed on an annual basis and may be updated throughout the year. The limits are set to
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
86
minimize the concentration of risks and therefore mitigate financial loss through potential
counterparty’s failure to make payments. The Company’s maximum exposure to credit risk for the
components of the statement of financial position is the carrying amounts as illustrated in note 19. The
Company’s maximum exposure for financial guarantees and financial derivative instruments are as
below.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations
associated with its financial liabilities that are settled by delivering cash or another financial asset. The
Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient
liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Company’s reputation. The reputation of the
Company and its subsidiaries
The non-derivative financial liabilities of the Company sorted by due dates (based on undiscounted cash
flows contracted) are as follows:
December
31, 2015 December 31, 2016
Up to 1
year
1 - 2 years
3 - 5 years
More than
5 years
Total Total
Loans, borrowings
and debentures (1,643,470) (2,319,652) (4,700,204) (8,404,650) (17,067,976) (17,936,372)
Trade payables (1,467,570) - - - (1,467,570) (1,544,822)
Financial instrument derivative (41,023) (100,992) (16,696) (256,604) (415,315) -
Other financial liabilities (25,734) - - - (25,734) -
REFIS (60,358) (14,299) (24,582) (111,597) (210,836) (203,337)
(3,238,155) (2,434,943) (4,741,482) (8,772,851) (19,187,431) (19,684,531)
Market risk
Market risk is the risk that changes in market prices – such as foreign exchange rates, interest rates and
equity prices – will affect the Company’s income or the value of its holdings of financial instruments.
The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimizing the return.
The Company uses derivatives to manage market risks. All such transactions are carried out within the
guidelines set by the Risk Management Committee. Generally, the Company seeks to apply hedge
accounting to manage volatility in profit or loss. The Company seeks to apply hedge accounting to
manage the volatility in results for certain operations.
a) Foreign exchange risk
As at December 31, 2016 and 2015, the Company and its subsidiaries had the following net exposure to
the exchange rate variations on assets and liabilities denominated in Brazilian Reais:
December 31, 2016 December 31, 2015
R$ US$ R$ US$
Cash and cash equivalents 413,414 126,849 123,038 31,509
Trade receivables 11,940 3,664 16,112 4,126
Loans, borrowings and debentures (5,559,995) (1,705,991) (5,894,172) (1,509,468)
Contingent consideration (68,388) (20,984) (65,064) (16,663)
Derivative financial instruments (notional) 6,413,619 1,967,911 5,959,411 1,526,176
Foreign exchange exposure, net 1,210,590 371,449 139,325 35,680
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
87
Sensitivity analysis on exchange rate changes:
The probable scenario was defined based on the U.S. Dollar market rates as at December 31, 2016,
which determines the fair values of the derivatives at that date. Stressed scenarios (positive and negative
effects, before tax effects) were defined based on changes of a 25% and 50% to the U.S. Dollar
exchange rates used in the probable scenario.
Based on the financial instruments denominated in U.S. Dollars at December 31, 2016, the Company
performed a sensitivity analysis by increasing and decreasing the exchange rate for R$/US$ by 25% and
50%. The probable scenario considers the estimated exchange rates at the due date of the transactions
for the companies with functional currency Real (positive and negative, before tax effects), as follows:
Exchange rate sensitivity analysis (R$/US$)
Scenario
December 31,
2016 Probable 25% 50% -25% -50%
At December 31, 2016 3.2591 3.6000 4.5000 5.4000 2.7000 1.8000
The external source used by the Company for market projections was the Company “Tendências
Consultoria Integrada”.
Considering the above scenario the profit or loss would be impacted as follows:
Variation scenario
Instrument Risk factor Probable 25% 50% -25% -50%
Cash and cash equivalents USD fluctuation 43,243 114,164 228,328 (114,164) (228,328)
Trade receivables USD fluctuation 1,249 3,297 6,593 (3,297) (6,595)
Exchange rate
derivatives (notional) USD fluctuation 6,727 15,231 30,462 (15,231) (30,462)
Exchange rate and USD and
interest derivatives (notional)(i) CDI fluctuation 247,055 1,296,713 2,540,328 (1,191,046) (2,435,157)
Loans, borrowings
and debentures USD fluctuation (581,572) (1,535,392) (3,070,784) 1,535,392 3,070,784
Contingent consideration USD fluctuation (7,153) (18,886) (37,771) 18,885 37,770
Impacts on profit or loss (290,451) (124,873) (302,844) 230,539 408,012
(i) For sensitivity analysis, it’s only considered exchange rate swaps for Notional.
b) Interest rate risk
The Company and its subsidiaries monitor the fluctuations in variable interest rates in connection with
its borrowings, especially those that accrue interest using LIBOR, and uses derivative instruments in
order to minimize variable interest rate fluctuation risks.
Sensitivity analysis on changes in interest rates:
A sensitivity analysis on the interest rates on loans and borrowings in compensation for the CDI
investments with pre-tax increases and decreases of 25% and 50% is presented below:
December 31, 2016
Nominal
amount
25%
50%
-25%
-50% Exposure interest rate(i)
Cash and cash equivalents 406,135 101,534 203,068 (101,534) (203,068)
Marketable securities 42,621 10,655 21,311 (10,655) (21,311)
Interest rate derivatives 113,125 (240,421) (442,899) 297,176 661,485
Loans, borrowings
and debentures (1,040,392) (230,767) (461,534) 230,767 461,534
Impacts on profit or loss (478,511) (358,999) (680,054) 415,754 898,640
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
88
The probable scenario considers the estimated interest rate, as follows:
Probable 25% 50% -25% -50%
SELIC 11.74% 14.68% 17.61% 8.81% 5.87%
CDI 11.48% 14.35% 17.22% 8.61% 5.74%
TJ462 8.50% 10.63% 12.75% 6.38% 4.25%
TJLP 7.50% 9.38% 11.25% 5.63% 3.75%
The external source used by the Company for market projections was the “Tendências Consultoria
Integrada”.
Financial instruments fair value
The fair values of the financial assets and liabilities are included at the amount at which the instrument
could be exchanged in a current transaction between willing parties, other than in a forced or liquidation
sale. The following methods and assumptions were used to estimate the fair values:
The cash and cash equivalents, accounts receivable, trade receivables, trade payables and other current
liabilities approximate their carrying amount largely due to the short-term maturity of these instruments.
The fair values of the quoted notes and bonds are based on price quotations at the reporting date. The
fair value of unquoted instruments, loans from banks and other financial liabilities, obligations under
finance leases, as well as other non-current financial liabilities is estimated by discounting future cash
flows using rates currently available for debt on similar terms, credit risk and remaining maturities.
The market value of the Senior Notes Due 2018, 2023 and 2027 are listed on the Luxembourg Stock
Exchange (note 19) is based on their quoted market price as of December 31, 2016, of 95.68% (78.71%
on December 31, 2015) and 96.05% (83.83% at December 31, 2015), and 100,65%, respectively, of the
face nominal value at December 31, 2016.
The fair value of Perpetual Notes listed on the Luxembourg Stock Exchange (Note 19) is based on their
quoted market price as December 31, 2016 of 103.03% (79.64% at December 31, 2015) of the face
value of obligations at December 31, 2016.
The fair value of other loans and financing, the respective market values substantially approximate the
amounts recorded due to the fact that these financial instruments are subject to variable interest rates
(Note 19).
The Company and its subsidiaries enter into derivative financial instruments with various
counterparties, principally financial institutions with investment grade credit ratings. Derivatives valued
using valuation techniques with observable market data refer mainly to interest rate swaps and foreign
exchange forward contracts.
The fair value of derivative financial instruments is determined using valuation techniques and
observable market data. The valuation techniques applied more often include pricing models and swaps
contracts, with a present value calculation. The models consider various data, including counterparty
credit quality, spot exchange rates, forward curves of interest rates and curves of the commodity term
rates.
The carrying amounts and fair value of financial assets and financial liabilities are as follows:
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
89
Carrying amount Assets and liabilities measured at fair value
December
31, 2016
December
31, 2015
December 31, 2016 December 31, 2015
Level 1 Level 2 Level 1 Level 2
Assets
Exclusive funds 3,203,907 2,185,352 - 3,203,907 - 2,185,352
Investment securities 371,167 97,222 - 371,167 - 97,222
Other financial assets 70,487 144,208 70,487 - - 144,208
Derivate financial instruments 747,411 2,292,859 - 747,411 - 2,292,859
Total 4,392,972 4,719,641 70,487 4,322,485 - 4,719,641
Liabilities
Loans, borrowings and debentures (3,813,467) (4,401,745) - (3,813,467) - (4,401,745)
Pension and post-employment benefits (441,480) (344,334) - (441,480) - (344,334)
Contingent consideration (166,807) (217,377) - (166,807) - (217,377)
Derivative financial instruments (283,541) (740,718) - (283,541) - (740,718)
Total (4,705,295) (5,704,174) - (4,705,295) - (5,704,174)
Hedge accounting
Currently the Company has adopted the hedge accounting of fair value for some its operations that both
the hedging instruments and the hedged items are accounted for at fair value through profit or loss..
Operations and accounting effects of this adoption are as follows:
Debt Derivative Total
At December 31, 2015 2,522,772 (822,586) 1,700,186
Interest amortization (72,662) 241,521 168,859
Fair value (294,099) 455,793 161,694
At December 31, 2016 2,156,011 (125,272) 2,030,739
Capital management
The Company's policy is to maintain a robust capital base to promote the confidence of investors,
creditors and the market, and to ensure the future development of the business. Management monitors
that the return on capital is adequate for each of its businesses.
33 Post-employment benefits
December 31, 2015
December 31, 2015
Futura 43,401 48,414
Futura II 163 222
COMGÁS 397,916 295,698
441,480 344,334
Pension plan
Defined contribution
The Company grants defined contribution retirement plans to all employees. The assets of the plan are
maintained by Futura plans, managed by Futura II - Supplementary Pension Entity ("Futura II"), and
COMGÁS - PLAC Retirement Plan. The Company and its subsidiaries do not have legal or constructive
obligations for additional extraordinary contributions if the plan does not have sufficient assets to pay
all the benefits or eventual occurrence of a deficit.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
90
During the year ended December 31, 2016, the amount of sponsor contributions to the plans was R$ 88
(R$ 121 on December 31, 2015).
Actuarial liabilities
Defined benefit
Defined benefit plan paid off, whose active participants have a paid-up benefit calculated in accordance
with the regulation, which is being updated to the date of receipt by the plan of readjustment index,
which leads the company to adopt such a provision the present value of benefits and that assisted
participants receive annuity under the plan. The main actuarial risks are:
(i) higher survival to that specified in mortality tables;
(ii) the return on equity under the actuarial discount rate plus the accumulated IGP-DI; and
(iii) real family structure of different retirees established hypothesis.
The Company contributes to the following post-employment defined benefit plans:
Futura:
The subsidiary CLE sponsors the Futura – Supplementary Pension Entity (“Futura”), formerly Previd
Exxon - Private Pension Entity, which has the main objective supplemental benefits, within certain
limits established in the regulations of the Retirement Plan. This plan was amended to close it to new
entrants and approved by the relevant authorities on May 5, 2011. During the year ended December 31,
2016, the amounts of contributions totaled R$ 4,571 (R$ 7,499 for the year ended December 31, 2015).
The weighted average duration of obligation is 10,66 years. In 2017 the subsidiary expects to make a
contribution in the amount of R$ 37,442 in relation to its defined benefit plan.
COMGÁS:
Obligations relating to plans for post-employment benefits, which include health care, pension for
death, incapability assistance and lifetime medical care.
The defined benefit pension plan is governed by the employment laws of the Brazil, which require final
salary payments to be adjusted for the consumer price index upon payment during retirement. The level
of benefits provided depends on the member’s length of service and salary at retirement age. During the
year ended December 31, 2016, the amounts of contributions totaled R$ 23,588 (R$ 16,250 for the year
ended December 31, 2015). The weighted average duration of obligation is 12 years.
Details of the present value of the defined benefit obligation and the fair value of plan assets are as
follows:
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
91
December 31, 2016
December 31, 2015
Actuarial obligation at beginning of the year 654,329 639,622
Current service cost 238 247
Interest expense 84,017 76,009
Actuarial (gain) loss arising
from financial assumptions (2,340) (56,544)
Actuarial (gain) loss arising
from experience adjustment 52,301 38,207
Benefits payment (55,648) (43,211)
Actuarial obligation at the end of the year 732,897 654,330
Fair value of plan assets at beginning of the year (361,026) (334,330)
Interest income (45,453) (38,770)
Earnings on assets
greater than discount rate (9,151) (7,387)
Contributions paid (4,572) (7,499)
Benefit payments 32,060 26,961
Fair value of plan assets end of the year (388,142) (361,025)
Superplus (deficit) for the year 344,755 293,305
Asset Ceiling effect - 51,176
Net defined benefit liability 344,755 344,481
Total expense recognized in profit or loss is as follow:
December 31, 2016
December 31, 2015
Current service cost (238) (247)
Interest expense (39,892) (37,239)
(40,130) (37,486)
Total amount recognized as accumulated other comprehensive income:
December 31, 2016
December 31, 2015
Accumulated at the beginning of the year 116,430 90,979
Actuarial (gain) loss arising
from financial assumptions 94,070 (56,544)
Actuarial (gain) loss arising
from experience adjustment 51,124 38,207
Earnings on assets
greater than discount rate (9,151) (7,388)
Irrecoverable surplus change - 51,176
Accumulated at the end of the year 252,473 116,430
The plan assets are comprised of the following:
December 31, 2016 December 31, 2015
Amount % Amount %
Fixed income bonds 364,659 93.95% 296,402 82.10%
Variable-income securities 19,407 5.00% 33,900 9.39%
Other 4,075 1.05% 30,723 8.51%
388,141 100% 361,025 100%
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
92
Plan assets are comprised of financial assets with quoted prices in active markets and therefore are
classified as Level 1 and Level 2 in the valuation hierarchy of fair value. The overall expected rate of
return on plan assets is determined based on prevailing market expectations on that date, applicable to
the period over which the obligation is to be settled.
The main assumptions used to determine the benefit obligations of the Company are as follows:
Futura COMGÁS
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Discount rate 10.84% 12.98% 10.83% 14.14%
Inflation rate 4.50% 5.30% 4.50% 6.50%
Future salary increases N/A N/A 7.64% 9.69%
Increase in pension plans 4.50% 5.30% 4.50% 6.50%
Sensitivity analysis
Changes in the discount rate for the balance sheet date in one of the relevant actuarial assumptions,
while maintaining other assumptions, would have affected the defined benefit obligation as shown
below:
Discount rate
Increase Decrease
0.5% -0.5%
Futura (19,905) 21,749
Futura II (45) 47
COMGÁS (23,263) 20,013
There was no change in relation to previous years in the methods and assumptions used in preparing the
sensitivity analysis.
34 Share-based payment
On July 29, 2011, the guidelines for the outlining and structuring of the stock option compensation plan
for Cosan S.A.’s executives and employees was approved, authorizing the issue of up to 5% of shares
comprising Cosan S.A.’s total capital. This stock option plan was created to attract and retain
executives and key employees, offering them the opportunity to become Cosan S.A.’s shareholders.
On August 18, 2011, Cosan S.A.’s board of directors approved the total number of stock option awards
of 12,000,000 common shares to be issued or treasury shares held by Cosan S.A., corresponding to
2.41% of the share capital at that time. On the same date the eligible executives were informed about
the terms and conditions of the stock-option plan.
As of August 18, 2011, 10,525,000 awards were granted in the two tranches described below:
Tranche A - The options can be exercised after a vesting period of one year, considering a maximum
percentage of 20% per annum of the total stock options granted by Cosan S.A. for an exercise period of
7 years. Exercise period ends on August 19, 2016.
Tranche B - The options can be exercised after a vesting period of one year, considering a maximum
percentage of 10% per annum of the total stock options granted by Cosan S.A. within an exercise period
of 12 years. Exercise period ends in August 19, 2021.
Tranche C - The options can be exercised after a vesting period of one year, considering a maximum
percentage of 20% per annum of the total stock options granted by Cosan S.A. within an exercise period
of 7 years. Exercise period ends in December 11, 2017.
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
93
According to the average market value of the shares on a 30 day period ending at issuance, the exercise
price was defined to be R$22.80 per share, without any discount.
At April 24, 2013, April 25, 2014 and August 31, 2015, 970,000, 960,000 and 759,000 options,
respectively, secured from the fifth year, were granted to eligible executives:
The fair value of share based payments was estimated adopting with the following premise:
Number of instruments
Market price
on grant date
Exercise
price at
December
31, 2015
Fair value
at grant
date - R$(i)
Expected
life
(years)
Interest
rate
Expected
volatility
Granted
Outstanding
At
December
31, 2016
Share option programmes
August 18, 2011 - Tranche A 1 to 7 12.39% 31.44% 4,825,000 (3,083,000) 1,347,000 22.80 23.48 6,80
August 18, 2011 - Tranche B 1 to 12 12.39% 30.32% 5,000,000 (1,500,000) 3,500,000 22.80 23.48 8,15
December 12, 2012 - Tranche C 1 to 7 8.78% 31.44% 700,000 (48,000) 652,000 38.89 41.64 10.10
April 24, 2013 5 of 7 13.35% 27.33% 970,000 - 860,000 45.22 47.82 17,95
April 25, 2014 5 of 7 12.43% 29.85% 960,000 - 945,000 39.02 38.79 15,67
August 31, 2015 5 of 7 14.18% 33.09% 759,000 - 674,000 19.96 19.31 7.67
13,214,000 (4,631,000) 7,978,000
(i) The fair value of the employee share options has been measured using the Black-Scholes formula.
Expected exercise - The expected timeframe the Company for the exercise of the options was
determined by considering the premise that executives exercise their options after the grace period.
Expected volatility – Due to the new capital structure and business model after the formation of the JVs,
the Company opted to use the historic volatility of their shares adjusted by volatility of competitors’
shares that operate in similar lines of business
Expected dividends – The dividends expected were calculated on the basis of the current market value
on the grant’s date, adjusted by the average rate of return of capital to shareholders during the forecast
period, and compared with to the book value shares. The expected dividends used in the Black-Scholes
pricing model were 3.80%.
Risk-free interest rate - The Company considered the DI interest rate free of risks traded on the BM &
FBOVESPA on the occasion of the granting of the options and for the term equivalent to the term of the
options granted.
On December 31, 2016, R$ 8,369 (R$ 11,279 on December 31, 2015) had been recognized as an
expense related to the stock option plan. The weighted average remaining contractual term for the
options at December 31, 2016 was 3.1 years. The expense to be recognized in future years total R$
12,830 at December 31, 2016.
The changes in the plan during the period was:
Number of options Weighted average
December 31, 2015 9,671,000 28.35
Cancellation or settlements (285,000)
Share options exercised (1,408,000) 26.65
December 31, 2016 7,978,000 29.13
Cosan S.A. Indústria e Comércio
Notes to the financial statements (In thousands of Brazilian Reais – R$, unless otherwise stated)
94
35 Subsequent events
35.1 Third-party credit assignment
On January 5, 2017, the subsidiary “Cosan S.A” received the amount of R$ 233,570 related to the
assignment of credit to third parties described in note 24.
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