3.8. Fixed Assets
Fixed assets are measured at historic cost less accumulated depreciation. The historic cost includes expenses directly attributed to the acquisition of the assets, and also includes, in the case of qualifying assets, borrowing costs capitalized pursuant to the accounting policies of the Company. These assets are classified in the appropriate fixed assets categories when they are completed and ready for their intended use. Depreciation of these assets begins when they are ready for their intended use on the same basis as other fixed assets.
Depreciation is recognized based on the estimated useful life of each asset using the straight-line method, so that once the useful life has ended, the value of the cost less its residual value is null (except for lands and construction in progress). The Company believes that the estimated useful life of each asset is similar to the depreciation rates determined by the ANEEL, which are accepted in the market as adequately expressing useful life of assets. In addition, with regard to the Company’s understanding of the current regulatory framework for concessions, including Law 12.783/2013, indemnification at the end of the concession was considered, based on the lesser of either the VNR or the residual book value, this being the factor that is considered when measuring fixed assets (see details in Note 16).
Assets held under commercial lease are depreciated based on their expected useful life in the same way as owned assets, or over a shorter period, where applicable, as per the terms of the lease agreement in question.
A fixed assets item is written off after it is disposed of or when there are no future economic benefits resulting from the continued use of the asset. Any gains or losses in the sale or disposal of a fixed assets item are calculated as the difference between the amounts received in the sale and the net book value of the asset, recording the result in fiscal year profits and losses.
3.8.1. Borrowing Costs
Each month, interest and, where applicable, the exchange variation incurred on loans and financing are added to the cost of acquisition of the fixed assets in formation, considering the following criteria for capitalization:
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a) |
The capitalization period occurs when the qualified asset is in the construction phase, and capitalization of interest ceases when the item is available for use; |
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b) |
Interest is capitalized considering the weighted average rate of current loans and financing on the date of capitalization, or, for assets in which specific loans were obtained, the rates of those specific loans; |
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c) |
The interest capitalized each month cannot exceed the value of the interest expenses calculated during the capitalization period; |
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d) |
The capitalized interest is depreciated considering the same criteria and estimated useful life determined for the corresponding item. |
Gains on investments resulting from temporary allocation of funds obtained with specific loans and financing not yet expensed with the qualifying asset are deducted from the costs of loans and financing eligible for capitalization, when the effect is material.
All other costs from loans and financing are recorded in profits and losses for the fiscal year in which they are incurred.