financial statements ended december 31, 2016 (a...

Cosan S.A. Indústria e Comércio

Financial statements ended

December 31, 2016

(A free translation of the original in Portuguese)

2


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


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.


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.


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.


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.


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.


Statement of financial position December 31, 2016


9


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.


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


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


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


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.


Statements of changes in shareholder’ equity

For the period ended December 31, 2016 and 2015


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



Statements of changes in shareholder’ equity

For the period ended December 31, 2016 and 2015


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



Statement of cash flows For the period ended December 31, 2016 and 2015


14


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


Statement of cash flows For the period ended December 31, 2016 and 2015


15


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.


Statement of value added For the period ended December 31, 2016 and 2015


16


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


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


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



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



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.



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.



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.



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.



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.



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



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



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



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



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.



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.



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



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.



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.



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.



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.



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.



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



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;



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.



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:



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



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



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



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:



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



45

December 31, 2015 (Restated)


Raízen Energia Raízen


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



46

December 31, 2016


Statement of financial position: Raízen Energia Raízen

Combustíveis COMGÁS Lubricants

Cosan

Corporate


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



47

December 31, 2015 (Restated)


Statement of financial position: Raízen Energia Raízen


Cosan

Corporate


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



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


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:



49


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


(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



50

The ageing of trade receivables is as follows:

Consolidated


(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


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



51

12 Related parties

a) Receivables from and payables to related parties:


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 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


Janus Brasil Participações S.A 28,705 20,875 28,705 20,875

143,178 110,638 143,178 110,638


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



52


December

31, 2016

December

31, 2015

December

31, 2016

December

31, 2015

Current liabilieites

Corporate oprations / Agreements


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


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


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)



53

Consolidated


Product sales


Raízen Combustíveis S.A 12,732 14,666


78,698 64,861

Purchase of goods / Inputs


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


Radar Propriedades Agrícolas S.A. 260 -


(32,743) (22,212)

Financial result

Cosan Limited 369 444

Cosan Logística S.A - 512


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:


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



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.



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



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"


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



57

Summarized statement of profit or loss and other comprehensive income

Companhia de Gás de São Paulo - "COMGÁS"


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:



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.



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


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).



60

(c) Cash flows generated (used in) discontinued operations


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 - - -



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.



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.



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


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.



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



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



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.


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.


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:


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


At December 31, 2015 406,348 9,755,703

Acquisition - 3,529,668

Payment (347,087) (3,776,679)



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.



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



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.



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:


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



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


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)


expense (current and deferred) (60,213) 85,218



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)



73

c) Changes in deferred income taxes, net


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


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


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



74

a) Tax

The main tax lawsuits at December 31, 2016, are as follows:


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:



75


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



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


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 (



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



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).



79

g. Other 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


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



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



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:


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.



82

31 Financial results

Parent Company


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)



83

Consolidated


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.



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:



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:


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



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:


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



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



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:



89

Carrying amount Assets and liabilities measured at fair value

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.



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:



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)


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


from financial assumptions 94,070 (56,544)


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:


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%



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.



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



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.

financial statements ended december 31, 2016 (a...

Documents