The Brazilian exchange watchdog Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários, CVM) has backed Brazilian state-owned oil and gas group Petrobras and reversed a previous ruling that would have forced the group to restate its financial statements.
In March 2017, a technical committee within the CVM asked Petrobras to restate its financial results for the second and third quarters of 2013, and for the years of 2014, 2015 and 2016. Petrobras, which is heavily indebted due to government-mandated investments, had changed its accounting method for “currency hedging” in July 2013 to limit the impact of a weakening Brazilian real on debt. This hedge mechanism allows Petrobras to set aside 20% of its export proceeds in a special account for 7 years and to account them as shareholders’ equity. It protects more than half Petrobras's net debt from foreign exchange-rate variations, as the 35% decline of the real against the dollar since 2013 has raised Petrobras’ foreign liabilities and debt payments, when denominated in local currencies.
Following this new CVM ruling, Petrobras will continue to use this currency hedging mechanism and pursue its efforts to reduce its debt, estimated at US$96.4bn.