8. Property, equipment, intangible assets and lease

a) Changes in the period


	Property and equipment			Intangible assets
As of January 1, 2019		99,127			504,915
Additions		11,375			8,061
Write-offs		(56	)		(56	)
Depreciation / amortization in the period		(4,672	)		(7,055	)

As of March 31, 2019		105,774			505,865

Cost		146,865			626,921
Accumulated depreciation / amortization		(41,092	)		(121,056	)

As of January 1, 2020		142,464			553,452
Additions		20,746			19,914
Write-offs		(324	)		—
Transfers		(2,083	)		2,083
Depreciation / amortization in the period		(6,255	)		(15,648	)

As of March 31, 2020		154,548			559,801

Cost		211,839			672,045
Accumulated depreciation / amortization		(57,291	)		(112,244	)

b) Impairment test for goodwill

Given the interdependency of cash flows and the merger of business practices, all Group’s entities are considered a single cash generating units (“CGU”) and, therefore, goodwill impairment test is performed at the single operating level. Therefore, the carrying amount considered for the impairment test represents the Company’s equity.

The Group performs its annual impairment test in December and when circumstances indicates that the carrying value may be impaired. The Group’s impairment tests are based on value-in-use calculations. The key assumptions used to determine the recoverable amount for the cash generating unit were disclosed in the annual consolidated financial statements for the year ended December 31, 2019.

As of March 31, 2020, there were no indicators of a potential impairment of goodwill.

c) Leases

Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the period:


	Right-of-use assets			Lease liabilities
As of January 1, 2019		133,870			148,494
Depreciation expense		(3,430	)		—
Interest expense		—			2,328
Effects of exchange rate		(1,281	)		134
Payment of lease liabilities		—			(7,490	)

As of March 31, 2019		129,159			143,466

As of December 31, 2019		227,478			255,406
Additions (i)		19,273			19,361
Depreciation expense		(9,623	)		—
Interest expense		—			6,145
Revaluation (ii)		(19,968	)		(19,968	)
Impairment		(3,040	)		—
Effects of exchange rate		22,016			23,561
Payment of lease liabilities		—			(15,558	)

As of March 31, 2020		236,136			268,947

Current		—			56,581
Non-current		236,136			212,367

(i)	Additions to right-of-use assets in the period include prepayments to lessors and accrued liabilities.

(ii)	Revaluation of discount rate that represent the current market assessment.

The Group recognized rent expense from short-term leases and low-value assets of R$ 1,746 for the period ended December 31, 2019. The total rent expense of R$ 9,225, include other expenses related to leased offices such as condominium.

13. Property, equipment, intangible assets and leases

(a) Property and equipment


	Data processing system			Furniture and equipment			Security systems			Facilities			Fixed assets in progress			Total
Balance as of January 1, 2017		9,679			8,677			459			8,789			1,061			28,665
Additions		6,308			6,309			5,650			9,915			2,187			30,369
Business combination (Note 5 (ii))		804			412			34			478						1,728
Write-offs		(149	)		(1,690	)		(9	)		(2,503	)		—			(4,351	)
Transfers		709			2,181			—			358			(3,248	)		—
Depreciations in the year		(3,608	)		(2,628	)		(1,227	)		(1,875	)		—			(9,338	)

Balance as of December 31, 2017		13,743			13,261			4,907			15,162			—			47,073

Cost		27,400			19,124			6,403			19,281			—			72,208
Accumulated depreciation		(13,657	)		(5,863	)		(1,496	)		(4,119	)		—			(25,135	)
Balance as of January 1, 2018		13,743			13,261			4,907			15,162			—			47,073
Additions		22,319			10,448			376			9,930			40,076			83,149
Write-offs		(40	)		(924	)		(30	)		(5,078	)		(553	)		(6,625	)
Transfers		31			2,109			192			37,191			(39,523	)		—
Depreciation in the year		(7,282	)		(3,253	)		(2,892	)		(11,043	)		—			(24,470	)

Balance as of December 31, 2018		28,771			21,641			2,553			46,162			—			99,127

Cost		48,023			29,613			6,388			47,843			—			131,867
Accumulated depreciation		(19,252	)		(7,972	)		(3,835	)		(1,681	)		—			(32,740	)
Balance as of January 1, 2019		28,771			21,641			2,553			46,162			—			99,127
Additions		15,039			9,942			664			22,315			24,539			72,499
Write-offs		(304	)		(2,047	)		—			(6,112	)		—			(8,463	)
Transfers		—			2,409			—			22,130			(24,539	)		—
Depreciation in the year		(9,059	)		(4,189	)		(1,673	)		(5,778	)		—			(20,699	)

Balance as of December 31, 2019		34,447			27,756			1,544			78,717			—			142,464

Cost		62,235			38,086			7,716			84,726			—			192,763
Accumulated depreciation		(27,788	)		(10,330	)		(6,172	)		(6,009	)		—			(50,299	)

(b) Intangible assets


	Software			Goodwill		Costumer list			Trademarks			Other intangible assets			Total
Balance as of January 1, 2017		16,871			90,999		9,179			1,799			4,422			123,270
Additions		12,243			—		—			33			8,351			20,627
Business combination (Note 5 ii))		4,404			281,702		50,077			19,304			2,028			357,515
Write-offs		(140	)		—		—			—			—			(140	)
Transfers		(799	)		—		—			—			799			—
Amortization in the year		(6,879	)		—		(9,286	)		(898	)		(1,002	)		(18,065	)

Balance as of December 31, 2017		25,700			372,701		49,970			20,238			14,598			483,207

Cost		35,489			372,701		72,072			21,230			18,753			520,245
Accumulated Amortization		(9,789	)		—		(22,102	)		(992	)		(4,155	)		(37,038	)
Balance as of January 1, 2018		25,700			372,701		49,970			20,238			14,598			483,207
Additions		27,828			—		—			1,009			24,680			53,517
Business combination		—			9,799		—			—			—			9,799
Write-offs		(15	)		—		—			—			(13,275	)		(13,290	)
Amortization in the year		(14,742	)		—		(8,426	)		(2,024	)		(3,126	)		(28,318	)

Balance as of December 31, 2018		38,771			382,500		41,544			19,223			22,877			504,915

Cost		56,127			382,500		72,072			22,239			31,308			564,246
Accumulated amortization		(17,356	)		—		(30,528	)		(3,016	)		(8,431	)		(59,331	)
Balance as of January 1, 2019		38,771			382,500		41,544			19,223			22,877			504,915
Additions		51,348			—		27,000			—			10,601			88,949
Write-offs		(2,283	)		—		—			(33	)		(466	)		(2,782	)
Amortization in the year		(21,526	)		—		(7,945	)		(2,702	)		(5,457	)		(37,630	)

Balance as of December 31, 2019		66,310			382,500		60,599			16,488			27,555			553,452

Cost		104,270			382,500		105,977			22,239			39,823			654,809
Accumulated amortization		(37,960	)		—		(45,378	)		(5,751	)		(12,268	)		(101,357	)

(c) Impairment test for goodwill

The Group tests whether goodwill has suffered any impairment on an annual basis. For the years ended December 31, 2019 and 2018, the recoverable amount of the single CGU was determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections based on financial budgets approved by management covering a four-year period.

Cash flows beyond the four-year period are extrapolated using the estimated growth rates, which are consistent with forecasts included in industry reports specific to the industry in which the Group operates.

The Group performed its annual impairment test as of December 31, 2019 and 2018 which did not result in the need to recognize impairment losses on the carrying value of goodwill.

Key assumptions used in value-in-use calculations and sensitivity to changes in assumptions are:


Assumption		Approach used to determine values
Sales		Average annual growth rate over the four-year forecast period; based on past performance and management’s expectations of market development.
Budgeted gross margin		Based on past performance and management’s expectations for the future.
Other operating costs		Fixed costs, which do not vary significantly with sales volumes or prices. Management forecasts these costs based on the current structure of the business, adjusting for inflationary increases but not reflecting any future restructurings or cost saving measures. The amounts disclosed above are the average operating costs for the four-year forecast period.
Annual capital expenditure		Expected cash costs. This is based on the historical experience of management, and the planned refurbishment expenditure. No incremental revenue or cost savings are assumed in the value-in-use model as a result of this expenditure.
Long-term growth rate		This is the weighted average growth rate used to extrapolate cash flows beyond the budget period. The rates are consistent with forecasts included in industry reports.
Pre-tax discount rates		Reflect specific risks relating to the relevant segments and the countries in which they operate.

Discount rates represent the current market assessment of the risks specific to the Group, taking into consideration the time value of the money and risks of the underlying assets that have not been incorporated in the cash flow estimates, The discount rate calculation is based on the specific circumstances of the Group and is derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on the interest-bearing borrowings the Group has. Adjustments to the discount rate are made to factor in the specific amount and timing of the future tax flows in order to reflect a pre-tax discount rate. The average pre-tax discount rate applied to cash flow projections is 13,22% and net revenue.

d) Leases

Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the period:


	Right-of-use assets			Lease liabilities
As of January 1, 2019		133,870			148,494
Additions (i)		123,529			124,283
Depreciation expense		(32,831	)		—
Interest expense		—			17,613
Effects of exchange rate		2,910			2,995
Payment of lease liabilities		—			(37,979	)

As of December 31, 2019		227,478			255,406

Current		—			52,771
Non-current		227,478			202,635

(i) Additions to right-of-use assets in the period include prepayments to lessors and accrued liabilities.