Marfrig Global Foods S.A.
Parent Company and Consolidated
Financial Statements (DFP)
At December 31, 2022
CONTENTS | ||
Independent auditor's report | ||
Independent Auditor's Report on the Separate and Consolidated Financial Statements | ||
Financial Statements | ||
Balance sheet | 09 | |
Statement of income | 11 | |
Statement of changes in equity | 12 | |
Statement of cash flows | 13 | |
Statement of value added | 14 | |
Statement of comprehensive income | 15 | |
Earnings Release | ||
Earnings release | 16 | |
Notes to the separate and consolidated financial statements | ||
1. | Operations | 42 |
2. | Presentation and preparation of the parent company and consolidated financial statements | 42 |
3. | Summary of significant accounting practices | 44 |
Assets | ||
4. | Cash and cash equivalents | 58 |
5. | Marketable securities | 59 |
6. | Trade accounts receivable | 62 |
7. | Inventories | 63 |
8. | Biological assets | 63 |
9. | Recoverable taxes | 64 |
10. | Notes receivable | 66 |
11. | Restricted cash | 66 |
12. | Deferred income and social contribution taxes | 67 |
13. | Investments | 68 |
14. | Investment property | 75 |
15. | Property, plant and equipment | 76 |
16. | Right-of-use assets | 77 |
17. | Intangible assets | 79 |
Liabilities and Equity | ||
18. | Trade accounts payable | 80 |
19. | Trade accounts payable - supplier chain financing | 81 |
20. | Accrued payroll and related charges | 81 |
21. | Taxes payable | 88 |
22. | Loans, financing and debentures | 89 |
23. | Advances from customers | 92 |
24. | Lease payable | 92 |
25. | Notes payable | 94 |
26. | Provision for contingencies | 95 |
27. | Equity | 100 |
Income or Loss | ||
28. | Net sales revenue | 104 |
29. | Costs and expenses by nature | 105 |
30. | Net financial result | 105 |
31. | Earnings (loss) per share | 106 |
Financial instruments | ||
32. | Financial instruments and risk management | 106 |
Taxes on income | ||
33. | Income and social contribution taxes | 119 |
Other information | ||
34. | Segment reporting | 119 |
35. | Insurance coverage | 120 |
36. | Related-party transactions | 121 |
37. | Management compensation | 124 |
38. | Additional information of the cash flow statements | 128 |
39. | Events after the reporting period | 129 |
Audit Committee Opinions and Reports | ||
Opinion of the audit committee | 131 | |
Summary annual report on the activities of the statutory audit committee | 132 | |
Statutory audit committee`s opinion | 134 | |
Statements | ||
Statement of executive officers on the financial statements | 135 | |
Statement of executive officers on the independent auditors report | 136 |
(Free translation from the original issued in Portuguese. In the event of any discrepancies, the Portuguese language version shall prevail.)
Independent auditor's report on the individual and consolidated financial statements
Grant Thornton Auditores
Independentes Ltda.
Av. Eng. Luiz Carlos Berrini, 105 - 12oandar
Itaim Bibi, São Paulo (SP) Brasil
T +55 11 3886-5100
To the Management and Shareholders of
Marfrig Global Foods S.A.
São Paulo - SP
Opinion
We have audited the individual and consolidated financial statements of Marfrig Global Foods S.A. (the Company), identified as Parent and Consolidated, respectively, which comprise the statement of financial position as of December 31, 2022, and the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and the corresponding explanatory notes, including a summary of significant accounting policies.
In our opinion, the financial statements present fairly, in all material respects, the individual and consolidated financial position of Marfrig Global Foods S.A. as of December 31, 2022, and its individual and consolidated financial performance and individual and consolidated cash flows for the year then ended, in accordance with accounting practices adopted in Brazil and the International Financial Reporting Standards (IFRS) issued by the 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 "Auditor's responsibilities for the audit of the individual and consolidated financial statements" section of our report. We are independent of the Company and its subsidiaries in accordance with the relevant ethical requirements set forth in the Code of Ethics for Professional Accountants and the professional standards issued by the Federal Accounting Council 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 audit opinion.
© 2023 Grant Thornton Auditores Independentes Ltda. Todos os direitos reservados │Marfrig3
Key audit matters
The key audit matters are those who, in our professional judgment, were the most significant in our audit of current year. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and when we formed our opinion on these individual and consolidated financial statements, and, accordingly, we do not express a separate opinion on these matters.
1.Evaluation for impairment of goodwill arising from business combinations and intangible assets of defined useful life - Notes 3.1.7, 13, and 17
Why the matter was determined to be a KAM
As described in Notes 13 - "Investments" and 17 - "Intangible Assets", as of December 31, 2022, the Company had goodwill based on expected future profitability and certain intangible assets with finite useful life recorded in the individual and consolidated financial statements, in the amounts of
R$ 1,004,965 thousand, and R$ 20,412,424 thousand, respectively. The assets in question arise from acquisitions of investments made in the current year and in last years, subject to critical judgments and assessments in determining their recoverability, which take into consideration the generation of future profits, among other assumptions. Based on judgments and assumptions, the Company makes estimates to evaluate the likelihood of occurrence or not of future profits to realize said assets as well as to establish the assumptions and estimates that determine such profits.
By definition, the resulting accounting estimates will rarely be equal to the respective actual results (due to uncertainties and the high degree of judgment inherent in determining these assumptions and estimates). Therefore, the estimates and assumptions involve a significant risk and may require a material adjustment to the carrying amounts of the assets in the individual and consolidated financial statements at the date of the respective evaluations. For this reason, we considered this matter significant and, thus, a key audit matter.
How the matter was addressed in the audit of the financial statements
Our audit procedures included, among others:
- Evaluate and obtain an understanding of the processes, operating controls and cash flow projections considered in the impairment tests;
- Involve our corporate finance specialists in the valuation of financial and economic projections, review of mathematical calculations, analysis and understanding of the assumptions and methodology used to calculate and compare information to market expectations, and comparison of information to expectations from previous years and other historical information;
- Challenge the assumptions calculated by Management, such as interest and economic growth rates, to determine whether the assumptions were adequate, conservative or unrealistic based on economic data and market inputs;
- Evaluate the disclosures made by the Company in the individual and consolidated financial statements.
Based on our audit approach and the procedures performed, we understand that the amounts recorded and the criteria and assumptions adopted and disclosed in the financial statements to assess impairment of certain intangible assets, including goodwill, are appropriate in the context of the individual and consolidated financial statements taken as a whole.
© 2023 Grant Thornton Auditores Independentes Ltda. Todos os direitos reservados │Marfrig4
2. Realization of federal and state tax credits - Notes 9 and 12
Why the matter was determined to be a KAM
As described in Notes 9 - "Recoverable taxes" and 12 - "Deferred income and social contribution taxes", as December 31, 2022, the Company had federal and state tax credits recorded in the individual and consolidated financial statements, in addition to deferred income and social contribution tax assets arising from tax losses, negative social contribution basis and temporarily non-deductible and/or taxable differences, in the amounts of R$ 5,394,764 thousand, and R$ 15,196,144 thousand, respectively. Said tax credits are subject to critical judgments and assessments in determining their recoverability. The accrual of tax credits by companies in the meatpacking industry is inherent in the business, due to the tax incentives granted by Brazilian legislation to exporters.
Management assesses the impairment risk of these assets when the likelihood of using these tax credits is remote, considering the following legal alternatives: (i) offset against other state and federal taxes, under the prevailing tax legislation; (ii) payments to suppliers; (iii) acquisition of equipment, inputs, and consumables by means of negotiation with suppliers; (iv) request for approval and refund, in kind, of said tax credits. Regarding the deferred income tax asset, based on judgment and assumptions, the Company makes estimates to evaluate the likelihood of occurrence or not of future profits to realize said asset as well as to establish the assumptions and estimates that determine such profits.
By definition, the resulting accounting estimates will rarely be equal to the respective actual results (due to uncertainties and the high degree of judgment inherent in determining these assumptions and estimates). Therefore, the estimates and assumptions involve a significant risk and may require a material adjustment to the carrying amounts of the assets in the individual and consolidated financial statements at the date of the respective evaluations. For this reason, we considered this matter significant and, thus, a key audit matter.
How the matter was addressed in the audit of the financial statements
Our audit procedures included, among others:
- Analyze the existence of disallowance of any tax credits taken during the year;
- Obtain a confirmation letter from the Company's attorneys for the ongoing requests for tax credit refund;
- Analyze, on a sampling basis, acquisitions of inputs, equipment and payments to suppliers during the year;
- Evaluate and gain an understanding of the processes, operating controls and cash flow projections considered in the impairment tests and involve our corporate finance specialists in the valuation of financial and economic projections, review of mathematical calculations, analysis and understanding of the assumptions and methodology used to calculate and compare information to market expectations, and comparison of information to expectations from previous years and other historical information;
- Analyze, on a sampling basis, the federal and state tax credits offset against tax debts of the same nature and evaluate requests for refund filed during the year;
- Challenge the assumptions calculated by Management, such as interest and economic growth rates, to determine whether the assumptions were adequate, conservative or unrealistic based on economic data and market inputs;
- Evaluate the disclosures made by the Company in the individual and consolidated financial statements.
Based on the audit approach and the procedures performed, we understand that the amounts recorded and criteria and assumptions adopted in recording tax credits and respective disclosures are appropriate in the context of the individual and consolidated financial statements taken as a whole.
© 2023 Grant Thornton Auditores Independentes Ltda. Todos os direitos reservados │Marfrig5
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Marfrig Global Foods SA published this content on 01 March 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 March 2023 23:46:41 UTC.