26.

Financial Instruments

26.1

Financial instruments by category


			12.31.2018
	Note		Amortised cost		Fair value through other comprehensive income		Fair value through profit or loss		Total
Assets
Cash and cash equivalents		5		1,280.9		—		—		1,280.9
Financial investments		6		48.8		507.8		1,370.3		1,926.9
Guarantee Deposits		10		349.7		—		—		349.7
Collateralized accounts receivable		9		235.9		—		—		235.9
Contract assets				358.0		—		—		358.0
Trade accounts receivable, net		7		318.0		—		—		318.0
Customer and commercial financing				11.7		—		—		11.7
Derivative financial instruments		8		—		—		9.5		9.5
Other Assets				66.2		—		—		66.2

				2,669.2		507.8		1,379.8		4,556.8

Liabilities
Loans and financing		19		3,647.7		—		—		3,647.7
Trade accounts payable and others liabilities				1,550.5		—		—		1,550.5
Financial guarantee and of residual value		23		15.0		—		125.4		140.4
Derivative financial instruments		8		—		—		8.1		8.1

				5,213.2		—		133.5		5,346.7


			12.31.2017 (Restated)
	Note		Amortised cost		Fair value through other comprehensive income		Fair value through profit or loss		Total
Assets
Cash and cash equivalents		5		1,270.8		—		—		1,270.8
Financial investments		6		50.5		1,307.6		1,259.2		2,617.3
Guarantee Deposits		10		393.9		—		—		393.9
Collateralized accounts receivable		9		288.7		—		—		288.7
Contract assets				447.5		—		—		447.5
Trade accounts receivable, net		7		297.0		—		—		297.0
Customer and commercial financing				16.4		—		—		16.4
Derivative financial instruments		8		—		—		34.3		34.3
Other Assets				82.2		—		—		82.2

				2,847.0		1,307.6		1,293.5		5,448.1

Liabilities
Loans and financing		19		4,198.5		—		—		4,198.5
Trade accounts payable and others liabilities				1,502.5		—		—		1,502.5
Financial guarantee and residual value		23		30.7		—		108.9		139.6
Derivative financial instruments		8		—		—		8.9		8.9

				5,731.7		—		117.8		5,849.5

26.2

Fair value of financial instruments

The fair value of the Company’s financial assets and liabilities was determined using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to generate estimates of fair values. Consequently, the estimates presented below are not necessarily indicative of the amounts that might be realized in a current market exchange. The use of different assumptions and/or methodologies could have a material effect on the estimated realizable values.

The carrying amounts of cash and cash equivalents, trade accounts receivable, other financial assets and financial liabilities, except for loans and financing, are approximately their fair values. The following methods were used to estimate the fair value of each further category of financial instrument for which it is possible to estimate the fair value.

Financial investments – The fair value of securities is estimated by the discounted cash flow methodology. For private securities (corporate bonds), it is applied the market’s unit price of latest trade date at the end of reporting period multiplied by the quantity acquiried by the Company.

Loans and financing – The fair value of guaranteed notes (bonds) is the market’s unit price of latest trade date at the end of reporting period multiplied by the quantity issued. For the other loans and financing, the fair value is based on the value of the contractual cash flows. The discount rate used is based in the market interest rate to contract a new transaction in similar terms, or in its absence, in the future market yield curve for the cash flows of each liability.

The Company considers “fair value” to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. The Company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The Company is able to classify fair value balances based on the observable inputs. A fair value hierarchy is used to prioritize the inputs used to measure fair value. The three Levels of the fair value hierarchy are as follows:

•

Level 1—quoted prices are available in active markets for identical assets or liabilities at the reporting period. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives and listed equities.

•

Level 2—pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. However, they may be directly or indirectly observable at the consolidated statements of financial position date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include non-exchange traded derivatives such as swaps or over-the-counter forwards and options.

•

Level 3—pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in Management’s best estimate of fair value. At each balance sheet date, the Company performs an analysis of all instruments and includes in Level 3 all of those whose fair value is based on significant unobservable inputs.

The following table lists the Company’s financial assets and liabilities by level within the fair value hierarchy. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. In 2018 there was no change in the methods used to assess the fair value of financial instruments, as well as there were no changes or transfers of instruments level.


	12.31.2018
	Note		Level 2		Level 3		Total		Fair value of the other financial instruments		Fair value		Book value
Assets
Cash and cash equivalents		5		—		—		—		1,280.9		1,280.9		1,280.9
Financial investments		6		1,818.2		59.9		1,878.1		48.8		1,926.1		1,926.9
Guarantee Deposits		10		—		—		—		349.7		349.7		349.7
Collateralized accounts receivable				—		—		—		235.9		235.9		235.9
Contract assets				—		—		—		358.0		358.0		358.0
Trade accounts receivable, net		7		—		—		—		318.0		318.0		318.0
Customer and commercial financing				—		—		—		11.7		11.7		11.7
Derivative financial instruments		8		9.5		—		9.5		—		9.5		9.5
Other Assets				—		—		—		66.2		66.2		66.2

				1,827.7		59.9		1,887.6		2,669.2		4,556.0		4,556.8

Liabilities
Loans and financing				—		—		—		3,647.7		3,756.8		3,647.7
Trade accounts payable and others liabilities		19		—		—		—		1,550.5		1,550.5		1,550.5
Financial guarantee and of residual value				—		125.4		125.4		15.0		140.4		140.4
Derivative financial instruments		19		8.1		—		8.1		—		8.1		8.1

				8.1		125.4		133.5		5,213.2		5,455.8		5,346.7


	12.31.2017 (Restated)
	Note		Level 2		Level 3		Total		Fair value of the other financial instruments		Fair value		Book value
Assets
Cash and cash equivalents		5		—		—		—		1,270.8		1,270.8		1,270.8
Financial investments		6		2,507.2		59.6		2,566.8		50.4		2,617.3		2,617.3
Guarantee Deposits		10		—		—		—		393.9		393.9		393.9
Collateralized accounts receivable				—		—		—		288.7		288.7		288.7
Contract assets				—		—		—		447.5		447.5		447.5
Trade accounts receivable, net		7		—		—		—		297.0		297.0		297.0
Customer and commercial financing				—		—		—		16.4		16.4		16.4
Derivative financial instruments		8		34.3		—		34.3		—		34.3		34.3
Other Assets				—		—		—		82.2		82.2		82.2

				2,541.5		59.6		2,601.1		2,846.9		5,448.1		5,448.1

Liabilities
Loans and financing		19		—		—		—		4,198.5		4,408.6		4,198.5
Trade accounts payable and others liabilities				—		—		—		1,502.5		1,502.5		1,502.5
Financial guarantee and of residual value		23		—		108.9		108.9		30.7		139.6		139.6
Derivative financial instruments		8		8.9		—		8.9		—		8.9		8.9

				8.9		108.9		117.8		5,731.7		6,059.6		5,849.5


	Fair value of financial instruments using significant unobservable inputs (level 3)
	Assets			Liabilities
At 12.31.2016 (Restated)		35.0			122.2

Adding Shares		58.8			—
Disposal Claim		(34.8	)		—
Market value		0.6			(13.3	)

At 12.31.2017 (Restated)		59.6			108.9

Market value		0.3			16.5

At 12.31.2018		59.9			125.4

Changes in Level 3 financial instruments are recognized in the consolidated statements of income under the caption of financial income (expense), net.

26.3

Financial risk management policy

The Company has and follows a risk management policy, which involves the diversification of transactions and counterparties, with the objective of mapping the risks related to the financial transactions, as well as the operational directives related to these financial transactions. The policy provides for regular monitoring and management of the nature and general situation of the financial risks in order to assess the results and the financial impact on cash flows. The credit limits and risk rating of the counterparties are also reviewed periodically.

The Company’s risk management policy is part of the financial management policy established by the Executive Directors and approved by to the Board of Directors, and provides for monitoring by a Financial Management Committee. Under this policy, the market risks are mitigated when there is no counterparty in the Company’s operations and when it is considered necessary to support the corporate strategy. The Company’s internal control procedures provide for consolidated monitoring and supervision of the financial results and of the impact on cash flows.

The Financial Management Committee assists the Financial Department in examining and reviewing information in relation to the economic scenario and its potential impact on the Company’s operations, including significant risk management policies, procedures and practices.

The financial risk management policy includes the use of derivative financial instruments to mitigate the effects of interest rate fluctuations and to reduce the exposure to exchange rate risk. The use of these instruments for speculative purposes is forbidden.

26.3.1

Capital risk management

The Company uses capital management to ensure the continuity of its investment program and offer a return to its shareholders and benefits to its stakeholders and also to maintain an optimized capital structure in order to reduce financial costs.

The Company may review its dividends payment policy, pay back capital to the shareholders, issue new shares or sell assets in order to maintain or adjust its capital structure (to reduce indebtedness, for instance).

Liquidity and the leverage level are constantly monitored in order to mitigate refinance risk and maximize the return to the shareholders. The ratio between liquidity and the return to the shareholders may be changed pursuant to the assessment of the Board of Directors.

The Company’s capital management may be modified to adjust to changes in the economic scenario or strategic repositioning of the Company.

As of December 31, 2018, cash and cash equivalents and financial investments were US$ 439.2 lower than the Company’s financial indebtedness (US$ 310.8 lower as of December 31, 2017).

Of the total financial indebtedness as of December 31, 2018, 4.9% was short-term (9.3% as of December 31, 2017) and the weighted average term was equivalent to 5.5 years as of December 31, 2018 (6.0 years as of December 31, 2017).

26.3.2

Credit risk

Credit risk is the risk of a transaction negotiated between counterparties not meeting an obligation established in a financial instrument, or in negotiation of sales to customers, leading to a financial loss. The Company is exposed to credit risk in its operational activities, cash held in banks and other investments in financial instruments held in financial institutions.

•

Cash and cash equivalents and financial investments

The credit risk of cash and cash equivalents and financial investments is managed by the Company’s Financial Department in compliance with the financial and risk management policy. The counterparty credit limit is reviewed on a daily basis in order to minimize concentration of risks and mitigate financial losses due to the bankruptcy of a counterparty, as well as the transactions are performed with counterparties rated as investment grade by rating agencies (Fitch, Moody’s and Standard and Poor’s). The Financial Management Committee assists the Financial Department in examining and reviewing transactions with counterparties.

As of December 31, 2018 and 2017, all financial investments measured as at amortized cost and as at FVOCI are considered low credit risk and are in compliance with the Company’s financial and risk management policy.

The result of applying the expected credit losses model of IFRS 9 for cash and cash equivalents and financial investments was immaterial.

•

Trade accounts receivable and contract assets with customers

The Company may incur losses on amounts receivable from sales of spare parts and services to customers. To reduce the risk, Management performs an internal credit risk analysis which takes into account qualitative factors, such as past experiences, and quantitative factors, when applicable, related to external financial information. If the risk increases and/ or the customer present overdue amounts, the supply of spare parts and services can be stopped by the Company, which impacts its fleet operations.

The Company applies IFRS 9 simplified approach to the measurement of expected credit losses on trade accounts receivable balances (Note 2.2.6).

In order to calculate the expected credit losses, receivables are grouped by the period the items are outstanding, and an expected loss factor is applied based on actual credit loss experiences of each past period, which gradually increases as long as the receivable remains outstanding in portfolio. For receivables not overdue, the expected credit loss is calculated using past 10 years’ experience of losses and monitoring of forward trends. As of December 31, 2018, the initial expected loss factor under the methodology is 1.9% (1.8% as of December 31, 2017).

Contract assets refer to contracts in progress that have not been billed, mainly related to development contracts recognized over time in the Defense & Security segment.

The credit risk characteristic of the Company’s customers is different for the Defense & Security segment, since the counterparties refer only to government entities and agencies. The risk in this case is associated with the sovereign risk of each country, especially Brazil, as well as with the continuity of strategic projects under development, for which the Company usually has the enforceable right to receive for the performance completed to date. The Company historically has not presented losses in the trade accounts receivable and contract assets balances with these counterparties.

Trade accounts receivable and contract assets are written off when there is no reasonable expectation of recovery. Indications include, among others, the inability of the debtor to participate in a plan to renegotiate its debt or possible legal actions have been exhausted.

•

Other financial assets

Other financial assets measured as at amortized cost includes: guarantee deposits, collateralized accounts receivable, customer financing, court-mandated escrow deposits and loan with joint operation. The result of the expected credit losses model set forth in IFRS 9 for other financial assets was immaterial. In addition, the Company has guarantees, such as guarantee deposits in financial institutions rated as investment grade, pledge assets or other contractual guarantees, which also mitigates the risk of financial loss in these assets.

26.3.3

Liquidity risk

This is the risk of the Company not having sufficient funds to honor its financial commitments as a result of a mismatch of terms or volumes of estimated receipts and payments.

Projections and assumptions are established to manage the liquidity of cash in U.S. dollars and reais, in accordance with the financial management policy, based on contracts for future disbursements and receipts, and monitored periodically by the Company. Accordingly, possible mismatches are detected well in advance allowing the Company to adopt mitigation measures to reduce risks and financial cost.

The following table provides additional information related to undiscounted contractual obligations and commercial commitments and their respective maturities:


	Cash Flow		Less than one year		One to three years		Three to five years		More than five years
At December 31, 2018
Loans and financing		4,701.3		321.0		867.3		1,345.7		2,167.3
Trade accounts payable		892.1		892.1		—		—		—
Recourse and non recourse debt		341.4		324.0		7.6		6.6		3.2
Financial guarantees		152.1		51.0		39.9		31.3		29.9
Other liabilities		227.3		5.4		92.2		95.3		34.4

Total		6,314.2		1,593.5		1,007.0		1,478.9		2,234.8

At December 31, 2017 (Restated)
Loans and financing		5,400.7		491.6		784.9		1,220.2		2,904.0
Trade accounts payable		824.7		824.7		—		—		—
Recourse and non recourse debt		364.1		17.6		332.7		8.0		5.8
Financial guarantees		156.8		22.2		52.5		31.1		51.0
Other liabilities		249.4		11.4		46.1		92.3		99.6

Total		6,995.7		1,367.5		1,216.2		1,351.6		3,060.4

The table above shows the outstanding principal and interest if applicable at the maturity dates. In the case of the fixed rate liabilities, interest expense was calculated based on the rate established in each debt contract. Interest expense on floating rate liabilities was calculated based on a market forecast for each period (e.g. LIBOR 6m - 12m).

26.3.4

Market risk

Interest rate risk

This risk arises from the possibility of the Company incurring losses on the fluctuation of floating interest rates, which might increase financial expenses of financial liabilities, and/ or decrease financial income of financial assets, as well as negatively impacting the fair value of financial assets measured as at fair value. The lines of the Consolidated Financial Statements most affected by interest rate risks are:

•

Cash, cash equivalents and financial investments – the Company policy for managing the risk of fluctuations in interest rates on financial investments is to measure market risk by the Value-At-Risk—VAR methodology, which consists of an aggregate analysis of variety of risk factors that might affect the return of those investments.

•

Loans and financing – the Company monitors financial markets with the purpose of evaluate hedge structures (derivative transactions) in compliance with the financial and risk management policy to protect its exposure risks of volatility in foreign currency and interest rates.

At December 31, 2018, the Company’s cash, cash equivalents, financial investments and loans and financing were indexed as follows:


Without derivative effect	Pre-fixed					Post-fixed					Total
	Amount		%			Amount		%			Amount		%
Cash, cash equivalents and financial investments		2,742.3		85.49	%		465.5		14.51	%		3,207.8		100.00	%
Loans and financing		3,577.7		98.09	%		69.8		1.91	%		3,647.5		100.00	%

With derivative effect	Pre-fixed					Post-fixed					Total
	Amount		%			Amount		%			Amount		%
Cash, cash equivalents and financial investments		2,742.3		85.49	%		465.5		14.51	%		3,207.8		100.00	%
Loans and financing		3,194.3		87.57	%		453.3		12.43	%		3,647.6		100.00	%

At December 31, 2018, the Company’s cash equivalents and post -fixed financing were indexed as follows:


	Without derivative effect					With derivative effect
	Amount		%			Amount		%
Cash equivalents and financial investments		465.4		100.00	%		465.5		100.00	%
CDI		403.1		86.61	%		403.2		86.62	%
Libor		62.3		13.39	%		62.3		13.38	%
Loans and financing		69.9		100.00	%		453.4		100.00	%
TJLP		1.9		2.72	%		1.9		0.42	%
Libor		68.0		97.28	%		65.4		14.42	%
CDI		—		0.00	%		386.1		85.16	%

Foreign exchange rate risk

The functional currency of the Company and the majority of its subsidiaries is the US dollar (Nota 2.2.1).

Consequently, the Company’s operations most exposed to foreign exchange gains/losses are those denominated in reais (labor costs, tax issues, local expenses, financial investments and loans and financing) as well as investments in subsidiaries in currencies other than the US dollar.

Company policy for protection against foreign exchange risks on assets and liabilities is mainly based on seeking to maintain a balance between assets and liabilities indexed in each currency and management of foreign currency purchases and sales to ensure that, on realization of the transactions contracted, this natural hedge will occur. This policy minimizes the effect of exchange rate changes on assets and liabilities already contracted, but do not protect against the risk of fluctuations in future results due to appreciation or depreciation of the real that can, when measured in dollars, result in an increase or reduction in the portion of costs denominated in reais.

Under certain market conditions, the Company may protect itself against potential future mismatches of expenses and revenues denominated in foreign currency, to minimize the effects of future exchange variations on the Company’s consolidated statements of income.

Efforts to minimize the foreign exchange risk for rights and liabilities denominated in currencies other than the functional currency may involve transactions with derivatives, such as swaps, exchange options and Non-Deliverable Forwards (“NDF”) (Note 8).

At December 31, 2018, the Company had the following amounts of financial assets and liabilities denominated in several currencies:


	12.31.2018			12.31.2017			12.31.2016
				(Restated)			(Restated)
Loans and financing
Brazilian reais		286.5			629.0			832.9
U.S. dollars		3,341.6			3,555.5			2,910.7
Euro		19.6			14.0			16.3

		3,647.7			4,198.5			3,759.9

Trade accounts payable
Brazilian reais		77.1			87.6			91.9
U.S. dollars		715.6			621.0			783.2
Euro		27.2			115.0			75.3
Other currencies		72.2			1.1			1.7

		892.1			824.7			952.1

Total (1)		4,539.8			5,023.2			4,712.0

Cash and cash equivalents and financial investments
Brazilian reais		406.5			750.2			1,180.0
U.S. dollars		2,746.9			2,979.2			1,838.3
Euro		47.7			97.5			127.1
Other currencies		6.8			61.2			44.8

		3,207.9			3,888.1			3,190.2

Trade accounts receivable:
Brazilian reais		10.7			30.8			143.4
U.S. dollars		274.2			154.1			187.7
Euro		33.1			106.1			5.6
Other currencies		—			6.0			0.1

		318.0			297.0			336.8

Total (2)		3,525.9			4,185.1			3,527.0

Net exposure (1 - 2):
Brazilian reais		(53.6	)		(64.4	)		(398.6	)
U.S. dollars		1,036.1			1,043.2			1,667.9
Euro		(34.0	)		(74.6	)		(41.1	)
Other currencies		65.4			(66.1	)		(43.2	)

The Company has other financial assets and liabilities that are also influenced by foreign exchange variations that are not included in the table above. These are used to minimize exposure in the currencies presented.

26.4

Sensitivity analysis

In order to present positive and negative variations of 25% and 50% in the risk variable considered, a sensitivity analysis of the financial instruments, including derivatives, is presented below describing the effects on the monetary and foreign exchange variations on the financial income and expense, as well as in the consolidated shareholders’ equity, determined on the balances recorded at December 31, 2018, in the event of such variations in the risk component.

However, statistical simplifications were made in isolating the variability of the risk factors in question. Consequently, the following estimates do not necessarily represent the amounts that might be determined in future consolidated financial statements. The use of different hypotheses and/or methodologies could have a material effect on the estimates presented below.

26.4.1

Methodology

Assuming that the balances remain constant, the Company calculates the interest and exchange variation differential for each of the projected scenarios.

Evaluation of the amounts exposed to interest rate risk considers only the risks for the financial statement. Operations subject to prefixed interest rates were not included. The probable scenario is based on the possible change for each of the variables indicated, and positive and negative variations of 25% and 50% were applied to the rates in force as of the reporting date.

In the sensitivity analysis of derivative contracts, positive and negative variations of 25% and 50% were applied to the market yield curve (B3) as of the reporting date.

26.4.2

Interest risk factor


					*Additional variations in book balances ()**
	Risk factor	Amounts exposed at 12.31.2018			-50%			-25%			Probable scenario			+25%			+50%
Cash equivalents and financial investments	CDI		403.1			(12.6	)		(6.0	)		0.6			7.2			13.8

Net impact	CDI		403.1			(12.6	)		(6.0	)		0.6			7.2			13.8
Cash equivalents and financial investments	LIBOR		62.3			(0.9	)		(0.5	)		—			0.4			0.9
Loans and financing	LIBOR		(68.0	)		1.0			0.5			—			(0.5	)		(1.0	)

Net impact	LIBOR		(5.7	)		0.1			—			—			(0.1	)		(0.1	)

Loans and financing	TJLP		(1.9	)		0.1			—			—			—			(0.1	)

Net impact	TJLP		(1.9	)		0.1			—			—			—			(0.1	)
Rates considered	CDI		6.40	%		3.28	%		4.91	%		6.55	%		8.19	%		9.83	%
Rates considered	LIBOR		2.87	%		1.43	%		2.14	%		2.86	%		3.57	%		4.29	%
Rates considered	TJLP		6.56	%		3.49	%		5.24	%		6.98	%		8.73	%		10.47	%

(*)	The positive and negative variations of 25% and 50% were applied on the rates

26.4.3

Foreign exchange risk factor


					*Additional variations in book balances ()**
	Risk factor	Amounts exposed at 12.31.2018			-50%			-25%			Probable scenario			+25%			+50%
Assets			745.3			378.9			195.7			12.4			(170.8	)		(354.0	)

Cash, cash equivalents and financial investments	R$		528.4			268.6			138.7			8.8			(121.1	)		(251.0	)
Other assets	R$		216.9			110.3			57.0			3.6			(49.7	)		(103.0	)
Liabilities			(79.7	)		(40.6	)		(20.9	)		(1.3	)		18.2			37.9

Loans and financing	R$		(286.5	)		(145.7	)		(75.2	)		(4.8	)		65.6			136.1
Other liabilities	R$		206.8			105.1			54.3			3.5			(47.4	)		(98.2	)

Net impact			825.0			338.3			174.8			11.1			(152.6	)		(316.1	)

Exchange rate considered			3.8748			1.9050			2.8575			3.8100			4.7625			5.7150

(*)	The positive and negative variations of 25% and 50% were applied on the rates

26.4.4

Derivative contracts


						*Additional variations in book balances ()**
	Risk factor		Amounts exposed at 12.31.2018			-50%			-25%			Probable scenario			+25%			+50%
Derivative Designated as Hedge Accounting
Interest swap—fair value hedge		CDI		6.5			4.1			1.8			(0.5	)		(2.4	)		(4.3	)
Hedge destinated as cash flow		US$/R$		(7.4	)		13.5			9.9			7.3			4.7			1.3
Hedge desifnated as cash flow		LIBOR		2.3			—			—			—			—			—
Other derivatives
Interest swap		LIBOR		0.2			—			—			—			—			0.1
Foreign Exchange option		EUR/US$		—			(0.6	)		(0.2	)		—			0.2			0.3

Total				1.6			17.0			11.5			6.8			2.5			(2.6	)

Rate considered		LIBOR		2.87	%		1.43	%		2.14	%		2.86	%		3.57	%		4.29	%
Rate considered		CDI		6.40	%		3.28	%		4.91	%		6.55	%		8.19	%		9.83	%
Rate considered		US$/R$		3.8748			1.9050			2.8575			3.8100			4.7625			5.7150
Rate considered		LIBOR		1.1467			0.5750			0.8625			1.1500			1.4375			1.7250

(*)	The positive and negative variations of 25% and 50% were applied on the rates

26.4.5

Residual Value Guarantees

The residual value guarantees are reported in a manner similar to financial derivative instruments.

Based on residual value guarantee contracts in force, the Company ascertains any changes in values based on third party appraisals. The probable scenario is based on the Company’s expectation of recording the provisions on a statistical basis, and the positive and negative variations of 25% and 50% have been applied to the third party appraisals at the balance sheet date.


			Additional variations in book balances
	Amounts exposed at 12.31.2018		-50%			-25%			Probable scenario			+25%		+50%
Financial guarantee of residual value		125.4		(104.5	)		(90.0	)		(1.0	)		94.8		106.0

Total		125.4		(104.5	)		(90.0	)		(1.0	)		94.8		106.0

If a provision is considered insufficient to cover the probable execution of the guarantees, it is increased to adjust it to the Company’s exposure at the reporting period.