| b) | Foreign currency translation |
| I. | Functional and presentation currency |
The Consolidated Financial Statements of ITAÚ UNIBANCO HOLDING are presented in Brazilian Reais, which is its functional and presentation currency. For each subsidiary and investment in associates and joint ventures, ITAÚ UNIBANCO HOLDING defined the functional currency, as set forth in IAS 21 – The Effects of Changes in Foreign Exchange Rates.
The assets and liabilities of subsidiaries with a functional currency other than the Brazilian Real are translated as follows:
| • | Assets and liabilities are translated at the closing rate at the balance sheet date; |
| • | Income and expenses are translated at monthly average exchange rates; |
| • | Exchange differences arising from currency translation are recorded in other comprehensive income. |
| II. | Foreign currency transactions |
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statement of income as part of foreign exchange results and exchange variations on transactions.