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BUSINESS COMBINATION | 12 Months Ended
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Dec. 31, 2022
Business Combination |
BUSINESS COMBINATION |
| 3. | BUSINESS COMBINATION
In 2022, the CSN Group’s subsidiaries fully and/or partially acquired the companies Metalgráfica Iguaçu S.A. (“Metalgráfica”), Santa Ana, Topázio, Companhia Estadual de Geração de Energia Elétrica (“CEEE-G”), CSN Cimentos Brasil S.A. (“Cimentos Brasil”) and Companhia Energética Chapecó (“Chapecó”). The effect of each acquisition on the business combination is shown below. The acquisitions of the energy segment are intended to support and strengthen its business expansion strategy, through investments in renewable energy and self-production for greater competitiveness and the acquisitions of the cement and steel segment to improve the competitiveness of the business and strengthen the national chain, especially in relation to substitute packaging. 3.a) Acquisition of control of Metalgráfica Iguaçu S.A. On September 6, 2022, Companhia Metalúrgica Prada (“Prada”), a subsidiary of the Company, acquired 100% of Metalgráfica Iguaçu S.A. The assets acquired are in Paraná and Goiás. The operation is a strategic step to expand the production capacity of the Company's packaging division. The transaction consists of a business combination whereby Prada acquired control through the merger of Metalgráfica shares and, in exchange for the merger of shares, Metalgráfica shareholders received shares issued by Prada in substitution for Metalgráfica shares, according to the exchange ratio approved at an extraordinary general meeting of the companies. (i) Determination of the purchase price The table below summarizes the price considered for accounting purposes:
Schedule of determination of purchase price |  |  |  |  |  |
Item |  | Comment |  | BRL thousand |  | Reference
Equity interests issued |  | The Prada issued new shares that were delivered to Metalgrafica's shareholders |  | 263 |  | (a)
Equity interests issued |  | The Metalgrafica issued new shares which were acquired by Prada |  | 133,100 |  | (b)
Purchase price considered for the business combination |  |  |  | 133,363 |  |
a) | Prada approved a capital increase in the amount of R$263 with the issuance of 571,251 common shares, paid in with Metalgráfica shares. The shares were issued at the equity value according to the Appraisal Report.
The measurement of the fair value of Metalgráfica shares, transferred to Prada in the business combination, was performed using the discounted cash flow method, with the issue of an Economic Value Report prepared by independent appraisers and its results are presented in the table below:
Schedule of fair value measurement |
Equity value - Metalgráfica | date base - 03/31/2022
Discounted Cash Flow | 59,353
Discounted residual value | 33,973
Enterprise value | 93,326
Indebtdness net | (109,133)
Non-operating assets/liabilities | 16,070
Equity value | 263
b) Metalgráfica's Board of Directors approved on September 6, 2022 the capital increase in the amount of R$ 133,100 through the issue of 122,110,092 shares subscribed by Prada. (ii) Goodwill on acquisition of control The transaction generated goodwill for expected future profitability, as shown in the table below:
Schedule of goodwill on acquisition |  |  |  |
Item |  | BRL thousand |  | Reference
Purchase price considered |  | 133,363 |  | (i)
Fair value of the assets and liabilities acquired |  | 121,948 |  | (iii)
Goodwill based on expectations for future profitability (note 12) |  | 11,415 |  |
(iii) Fair value of assets and liabilities acquired The following table shows the allocation of the fair value of assets acquired and liabilities assumed at August 31, 2022, considering the direct and indirect interests, calculated based on independent appraisers’ reports.
Schedule of fair value of assets acquired and liabilities assumed |  |  |  |  |  |  |  |
(R$'000) |  | Accounting Balances |  | Proforma Adjustment |  | Fair value adjustment |  | Total fair value
Current Assets |  | 23,924 |  | 133,100 |  |  |  | 157,024
Cash and cash equivalents |  | 569 |  |  |  |  |  | 569
Trade receivables |  | 7,249 |  |  |  |  |  | 7,249
Inventories |  | 4,435 |  |  |  |  |  | 4,435
Other assets |  | 713 |  | 133,100 |  |  |  | 133,813
Recoverable taxes and contributions |  | 10,958 |  |  |  |  |  | 10,958
Non-current Assets |  | 58,408 |  |  |  | 72,184 |  | 130,592
Recoverable taxes and contributions |  | 38,649 |  |  |  |  |  | 38,649
Other assets |  | 1,856 |  |  |  |  |  | 1,856
Investments |  | 10 |  |  |  |  |  | 10
Property, plant and equipment |  | 17,750 |  |  |  | 72,184 |  | 89,934
Intangibles |  | 143 |  |  |  |  |  | 143
Total assets acquired |  | 82,332 |  | 133,100 |  | 72,184 |  | 287,616
Current Liabilities |  | 134,464 |  |  |  |  |  | 134,464
Borrowings and financing |  | 89,852 |  |  |  |  |  | 89,852
Trade payables |  | 17,114 |  |  |  |  |  | 17,114
Labor obligations |  | 17,339 |  |  |  |  |  | 17,339
Taxes payable |  | 181 |  |  |  |  |  | 181
Advances from customers |  | 1,158 |  |  |  |  |  | 1,158
Installments |  | 2,227 |  |  |  |  |  | 2,227
Other accounts |  | 6,593 |  |  |  |  |  | 6,593
Non-current Liabilities |  | 31,204 |  |  |  |  |  | 31,204
Borrowings and financing |  | 21,844 |  |  |  |  |  | 21,844
Installments |  | 6,462 |  |  |  |  |  | 6,462
Other accounts |  | 2,898 |  |  |  |  |  | 2,898
Total liabilities assumed |  | 165,668 |  |  |  |  |  | 165,668
Net equity acquired |  | (83,336) |  | 133,100 |  | 72,184 |  | 121,948
Pro forma adjustment: refers to the capital increase approved at the Board of Directors' Meeting held on September 6, 2022, in the amount of R$133,100, to be paid in within 24 months. The fair value allocation resulted in an adjustment totaling R$72,184, distributed among Metalgráfica's main assets. The following table shows the composition of the allocated amounts and a summary of its calculation methodology:
Schedule of fair value allocated amounts composition |  |  |  |  |  |  |  |
Assets acquired |  | Valuation method |  | Carrying amounts |  | Fair value adjustment |  | Total fair value
Property, plant and equipment |  | The values of fixed assets were adjusted by the difference between the revalued value of f ixed assets and their respective net book value, according to a technical evaluation carried out by an independent appraiser for the groups of assets represented by buildings, vehicles, furniture and fixtures. The useful lives follow the terms disclosed in note 11. |  | 17,750 |  | 72,184 |  | 89,934
|  |  |  | 17,750 |  | 72,184 |  | 89,934
Prada has engaged an independent company to prepare an appraisal report on the tangible and intangible assets and allocation of the excess price paid. 3.b) Acquisition of Santa Ana Energética S.A. and Topázio Energética S.A. On April 8, 2022, the Company and CSN Energia signed an agreement for the acquisition of 100% of the shares issued by Santa Ana and Topázio with Brookfield Americas Infrastructure (Brazil Power) Fundo de Investimento Participações Multiestratégia. The transaction was completed on June 30, 2022. Santa Ana holds the concession to operate the small hydroelectric plant of Santa Ana, located in the state of Santa Catarina, with a contract in effect until December 2046 and installed capacity of approximately 3.75 MW/h. Topázio, through its subsidiary Brasil Central Energia Ltda., holds the concession to operate the small hydroelectric plant of Sacre II, located in the state of Mato Grosso do Sul, with a contract in effect until June 2039 and installed capacity of approximately 30.00 MW/h. (i) Determination of the purchase price The table below summarizes the price considered for accounting purposes:
Schedule of determination of purchase price |  |  |  |  |  |  |  |
Item |  | Comment |  | Santa Ana Energética |  | Topázio Enérgetica |  | Reference
Assets transferred |  | In the transaction, a payment in the amount of R$466,153 was made. |  | 37,292 |  | 428,861 |  | (i)
Purchase price considered for the business combination |  |  |  | 37,292 |  | 428,861 |  |
(i) |  | On June 30, 2022, the transaction was concluded with the payment by CSN Cimentos and CSN Energia in the amount of R$466,153.
(ii) Goodwill on acquisition of control The transaction did not generate goodwill for expected future profitability, since the fair value of the assets has been fully allocated. (iii) Fair value of assets and liabilities acquired In the fair value identification of assets acquired and liabilities assumed, the Company applied the guidelines in IFRS 13 - Fair value measurement. The following table shows the allocation of the fair value on June 30, 2022, calculated based on independent appraisers’ reports.
Schedule of fair value of assets acquired and liabilities assumed |  |  |  |  |  |  |  |  |  |  |  |
|  | Santa Ana Energética |  | Topázio Enérgetica
(R$'000) |  | Carrying amounts |  | Fair value adjustments |  | Total fair value |  | Carrying amounts |  | Fair value adjustments |  | Total fair value
Cash and cash equivalents |  | 1,602 |  |  |  | 1,602 |  | 3,493 |  |  |  | 3,493
Trade receivables |  | 13 |  |  |  | 13 |  | 199 |  |  |  | 199
Inventories |  | 422 |  |  |  | 422 |  | 647 |  |  |  | 647
Recoverable taxes |  | 2 |  |  |  | 2 |  | 87 |  |  |  | 87
Other assets |  |  |  |  |  |  |  | 21 |  |  |  | 21
Property, plant and equipment (1) |  | 28,163 |  | 10,482 |  | 38,645 |  | 173,494 |  | (79,317) |  | 94,177
Intangíible assets (1) |  |  |  | (3,200) |  | (3,200) |  |  |  | 331,637 |  | 331,637
Total assets acquired |  | 30,202 |  | 7,282 |  | 37,484 |  | 177,941 |  | 252,320 |  | 430,261
Accounts payable |  | 2 |  |  |  | 2 |  | 179 |  |  |  | 179
Taxes payable |  | 72 |  |  |  | 72 |  | 821 |  |  |  | 821
Salaries and social charges |  |  |  |  |  |  |  | 167 |  |  |  | 167
Other payables |  | 92 |  |  |  | 92 |  |  |  |  |  |
Leases |  | 26 |  |  |  | 26 |  | 233 |  |  |  | 233
Total liabilities assumed |  | 192 |  |  |  | 192 |  | 1,400 |  |  |  | 1,400
Net equity acquired |  | 30,010 |  | 7,282 |  | 37,292 |  | 176,541 |  | 252,320 |  | 428,861
1 |  | - Refer to a PP&E impairment recognized in Topázio and a recognition of an onerous contract related to prior concession agreement of Santa Ana.
The subsidiary CSN Cimentos S.A. has engaged an independent company to prepare an appraisal report on the tangible and intangible (basically energy sales agreements) assets and allocation of the excess price paid. The fair value allocation resulted in an adjustment totaling R$259,602, distributed among Company's main assets. The following table shows the composition of the allocated amounts and a summary of its calculation methodology:
Schedule Of Fair Value Allocation Composition |  |  |  |  |  |  |  |
Assets acquired |  | Valuation method |  | Carrying amounts |  | Fair value adjustment |  | Total fair value
Property, plant and equipment |  | The values of fixed assets were adjusted by the difference between the revalued value of fixed assets and their respective net book value, according to a technical evaluation carried out by an independent appraiser for the groups of assets represented by improvements constructions, vehicles, furniture and fixtures. The useful lives follow the terms disclosed in note 12. |  | 201,424 |  | (68,835) |  | 132,589
Intangible assets |  | Evaluated by the MPEEM method that measures the present value of future income to be generated during the remaining useful life of a given asset. Using the analysis of the company's projected results as a reference, the pre-tax cash flows directly attributable to the asset are calculated, as of the base date stipulated in the evaluation. |  |  |  | 328,437 |  | 328,437
|  |  |  | 201,424 |  | 259,602 |  | 461,026
| 3.c) | Acquisition of Companhia Estadual de Geração de Energia Elétrica – CEEE-G
In July 2022, it began the process of participating in the auction held by the State of Rio Grande do Sul, for the sale of 100% of the shares in its possession, 6,381,908 equivalent to 66.23% of the share capital, of Companhia Estadual de Energia Elétrica - CEEE-G, as part of the CEEE Group’s privatization program, in accordance with State Law 15,298/19, on October 21, 2022, the transaction was completed with payment by the company of the auction winning price. CEEE-G is the holder of the concession for the exploration of five hydroelectric power plants (HPPs), eight small hydroelectric power plants (SHPs) and two hydroelectric power plants (HPPs) located in the State of Rio Grande do Sul. As part of the Auction, Companhia Estadual de Geração de Energia Elétrica – CEEE-G signed a new Concession Agreement with a 30-year term. In accordance with the guidelines of the aforementioned Auction, the Company's control was transferred as of the settlement of the transaction. (i) Determination of the purchase price The table below summarizes the price considered for accounting purposes:
Schedule of determination of purchase price |  |  |  |  |  |
Item |  | Comment |  | BRL thousand |  | Reference
Assets transferred |  | Payment made at the conclusion of the transaction |  | 928,000 |  | (i)
Purchase price considered for the business combination |  |  |  | 928,000 |  |
(i) |  | On October 21, 2022, the transaction was concluded with the payment by the Company of R$928,000.
(ii) Goodwill on acquisition of control The transaction did not generate goodwill for expected future profitability, since the fair value of the assets has been fully allocated. (iii) Fair value of assets and liabilities acquired In the fair value identification of assets acquired and liabilities assumed, the Company applied the guidelines in IFRS 13 - Fair value measurement. The following table shows the allocation of the fair value at October 1, 2022, calculated based on independent appraisers’ reports.
Schedule of fair value of assets and liabilities assumed |  |  |  |  |  |
(R$'000) |  | Carrying amounts |  | Fair value adjustments |  | Total fair value
Cash and cash equivalents |  | 661,864 |  |  |  | 661,864
Trade receivables |  | 51,333 |  |  |  | 51,333
Inventories |  | 2,636 |  |  |  | 2,636
Recoverable taxes |  | 5,043 |  |  |  | 5,043
Other assets |  | 125,516 |  |  |  | 125,516
Judicial deposits and guarantees |  | 59,335 |  |  |  | 59,335
Investments |  | 312,800 |  | 359,024 |  | 671,824
Property, plant and equipment |  | 31,853 |  |  |  | 31,853
Intangíible assets |  | 2,041,196 |  | 17,270 |  | 2,058,466
Total assets acquired |  | 3,291,576 |  | 376,294 |  | 3,667,870
Trade payables |  | 22,928 |  |  |  | 22,928
Taxes payable |  | 19,951 |  |  |  | 19,951
Salaries and social charges |  | 16,343 |  |  |  | 16,343
Deferred taxes |  | (65,560) |  |  |  | (65,560)
Judicial contingencies |  | 306,400 |  |  |  | 306,400
Other payables |  | 134,380 |  |  |  | 134,380
Bonus grant payable |  | 2,024,118 |  |  |  | 2,024,118
Total liabilities assumed |  | 2,458,560 |  |  |  | 2,458,560
Net equity acquired |  | 833,016 |  | 376,294 |  | 1,209,310
Equity acquired (66.23%) |  | 551,706 |  | 376,294 |  | 928,000
The subsidiary Companhia Florestal do Brasil S.A. has engaged an independent company to prepare an appraisal report on the tangible and intangible assets (basically concession agreement) and allocation of the excess price paid. The fair value allocation resulted in an adjustment totaling R$376,294 distributed among CEEE-G's main assets. The following table shows the composition of the allocated amounts and a summary of its calculation methodology:
Assets acquired |  | Valuation method |  | Carrying amounts |  | Fair value adjustment |  | Total fair value
Investments |  | Initially evaluated by the FDC - Discounted Cash Flow method for each investment, however, certain stakes are tied to purchase options with third parties at prices predetermined in the auction notice. Therefore, the fair value of these investments was measured considering the lower of the value identified in the FDC and the value of the purchase option |  | 312,800 |  | 359,024 |  | 671,824
Intangible assets |  | Evaluated by the MPEEM method that measures the present value of future income to be generated during the remaining useful life of a given asset. Using the analysis of the company's projected results as a reference, the pre-tax cash flows directly attributable to the asset are calculated, as of the base date stipulated in the evaluation. |  | 2,041,196 |  | 17,270 |  | 2,058,466
|  |  |  | 2,353,996 |  | 376,294 |  | 2,730,290
3.d) Acquisition of control of CSN Cimentos Brasil S.A. In September 2021, the Company started negotiations for the acquisition of 100% of the operations of LafargeHolcim (Brasil) S.A. in Brazil – currently named CSN Cimentos Brasil S.A., which belonged to the Holcim Investment group, L.C.U and Holderfin B.V. The transaction was completed on September 6, 2022 with the payment by CSN Cimentos S.A. of US$960,733, equivalent to R$5,013,436. With the completion of the transaction, the Company assumed control of operations that have Cement, Concrete and Aggregate operations, with a production capacity of 6.8 million tons of clinker and 11.0 million tons of cement, which represents approximately 12% of all cement production capacity in the country. Present in a large part of the Brazilian territory, operations are distributed in the Southeast (SP, RJ, MG and ES), Northeast (BA, PE, PB and RN) and Midwest (GO) regions. With the acquisition of Cimentos Brasil, the Company aims to expand its Cement production capacity, with the objective of reaching a total capacity of 16.3 million tons of cement per year, expanding its presence in the national territory and becoming one of the three largest cement producers in Brazil. (i) Determination of the purchase price The table below summarizes the price considered for accounting purposes:
Schedule of determination of purchase |  |  |  |  |  |
Item |  | Comment |  | CSN Cimentos Brasil |  | Reference
Assets transferred |  | In the transaction, a payment in the amount of US$960,733 was made |  | 5,013,436 |  | (i)
Purchase price considered for the business combination |  |  |  | 5,013,436 |  |
(i) |  | On the date of its completion, the transaction included (i) the transfer to the sellers of the amount of US$50,000 – equivalent to R$261,140 deposited by CSN Cimentos in September 2021 in an escrow account, and (ii) the payment of US$910,733 million – equivalent to R$4,752,296. The final price considered in the transaction was US$960,733 – equivalent to R$5,013,436.
(ii) Goodwill on acquisition of control The transaction generated goodwill for expected future profitability of R$646,594, as shown in the table below:
Schedule of goodwill on acquisition |  |  |  |
Item |  | CSN Cimentos Brasil S.A. |  | Reference
Purchase price considered |  | 5,013,436 |  | item (i)
Fair value of the assets and liabilities acquired |  | 4,622,604 |  | item (iii)
Goodwill based on expectations for future profitability (note 12) |  | 390,832 |  |
(iii) Fair value of assets and liabilities acquired The following table shows the allocation of the fair value of assets acquired and liabilities assumed at August 31, 2022, calculated based on independent appraisers’ reports.
Schedule of Fair value of assets acquired and liabilities assumed |  |  |  |  |  |
|  | CSN Cimentos Brasil
|  | Carrying amounts |  | Fair value adjustments |  | Total fair value
Cash and cash equivalents |  | 496,445 |  |  |  | 496,445
Trade receivables |  | 141,266 |  |  |  | 141,266
Inventories |  | 272,106 |  |  |  | 272,106
Recoverable taxes |  | 229,940 |  |  |  | 229,940
Deferred taxes |  | 982,547 |  |  |  | 982,547
Other assets |  | 147,565 |  |  |  | 147,565
Property, plant and equipment |  | 3,185,975 |  | 402,289 |  | 3,588,264
Intangíible assets |  | 7,429 |  | 173,586 |  | 181,015
Total assets acquired |  | 5,463,273 |  | 575,875 |  | 6,039,148
Trade payables |  | 510,522 |  |  |  | 510,522
Lease liabilities |  | 43,978 |  |  |  | 43,978
Taxes payable |  | 50,527 |  |  |  | 50,527
Salaries and social charges |  | 32,324 |  |  |  | 32,324
Other payables |  | 139,830 |  |  |  | 139,830
Taxes in installments |  | 148,249 |  |  |  | 148,249
Legal Contingencies |  | 491,114 |  |  |  | 491,114
Total liabilities assumed |  | 1,416,544 |  |  |  | 1,416,544
Net equity acquired |  | 4,046,729 |  | 575,875 |  | 4,622,604
CSN Cimentos S.A. has engaged an independent company to prepare an appraisal report on the tangible and intangible assets and allocation of the excess price paid. The fair value allocation resulted in a gain totaling R$575,875 distributed among CSN Cimentos Brasil’s main assets. The following table shows the composition of the allocated amounts and a summary of its calculation methodology:
Assets acquired |  | Valuation method |  | Carrying amounts |  | Fair value adjustment |  | Total fair value
Property, plant and equipment |  | Valued using the "MARKET APPROACH" method, where the fair value of the asset is estimated by comparing it with similar or comparable assets that have been sold or listed for sale in the primary or secondary market. |  | 3,185,975 |  | 402,289 |  | 3,588,264
Mining rights |  | Evaluated by the MPEEM method that measures the present value of future income to be generated during the remaining useful life of a given asset. Using the analysis of the company's projected results as a reference, the pre-tax cash flows directly attributable to the asset are calculated, as of the base date stipulated in the evaluation. |  | 2,456 |  | 135,216 |  | 137,672
Trademarks |  | The brands were evaluated using the Royalty Relief method, which consists in projecting expected royalty payments and measuring them at present value. |  |  |  | 38,370 |  | 38,370
Softwares |  | The Company's software has not been evaluated. |  | 4,973 |  |  |  | 4,973
|  |  |  | 3,193,404 |  | 575,875 |  | 3,769,279
3.e) Acquisition of control of Companhia Energética Chapecó On October 7, 2022, CSN Mineração S.A. and CSN Energia completed the acquisition of 100% of the shares issued by Companhia Energética Chapecó – CEC with Astra Infraestrutura I Fundo de Investimento em Participação Multiestratégia and BMPI Infra S.A. Companhia Energética Chapecó holds the concession for the Quebra-Queixo hydroelectric power plant, which has an installed capacity of 120 MW, located on the Chapecó River between the municipalities of Ipuaçú and São Domingos in the state of Santa Catarina, the concession contract was signed in December 2000 effective for 35 years and extended until December 2040, after discussions for renegotiation of the GSF, which took place in October 2021. (i) Determination of the purchase price The table below summarizes the price considered for accounting purposes:
Schedule of determination of purchase |  |  |  |  |  |
Item |  | Comment |  | BRL thousand |  | Reference
Assets transferred |  | Payment made upon acquisition |  | 358,634 |  | (i)
Purchase price considered for the business combination |  |  |  | 358,634 |  |
(i) |  | On October 7, 2022, the transaction was completed with the payment of R$358,634 by CSN Mineração and CSN Energia.
(ii) Goodwill on acquisition of control The transaction did not generate goodwill for expected future profitability, since the fair value of the assets has been fully allocated. (iii) Fair value of assets and liabilities acquired The following table shows the allocation of the fair value of assets acquired and liabilities assumed, the Company applied the guidelines in IFRS 13 - Fair value measurement. The following table shows the allocation of the fair value of the assets acquired and liabilities assumed on October 7, 2022, calculated based on independent appraisers’ reports.
Schedule of Fair value of assets acquired and liabilities assumed |  |  |  |  |  |
(R$'000) |  | Carrying amounts |  | Fair value adjustment |  | Total fair value
Assets |  |  |  |  |  |
Cash and cash equivalents |  | 41,693 |  |  |  | 41,693
Trade receivables |  | 5,745 |  |  |  | 5,745
Other assets |  | 246 |  |  |  | 246
Recoverable taxes and contributions |  | 5,420 |  |  |  | 5,420
Deferred taxes |  | 9,521 |  |  |  | 9,521
Judicial deposits |  | 151 |  |  |  | 151
Property, plant and equipment |  | 106,695 |  | 195,026 |  | 301,721
Intangíible assets |  | 104,499 |  | 83,610 |  | 188,109
Total assets acquired |  | 273,970 |  | 278,636 |  | 552,606
Liabilities |  |  |  |  |  |
Trade payables |  | 157 |  |  |  | 157
Labor obligations |  | 364 |  |  |  | 364
Taxes payable |  | 1,945 |  |  |  | 1,945
Concession payable |  | 12,281 |  |  |  | 12,281
Other accounts |  | 1,567 |  |  |  | 1,567
Advances from customer |  | 100,012 |  |  |  | 100,012
Concession payable |  | 77,646 |  |  |  | 77,646
Total liabilities assumed |  | 193,972 |  |  |  | 193,972
Total equity acquired |  | 79,998 |  | 278,636 |  | 358,634
CSN Mineração has engaged an independent company to prepare an appraisal report on the tangible and intangible assets (basically concession and energy sales agreements) and allocation of the excess price paid. The fair value allocation resulted in a gai totaling R$278,636, distributed among Company's main assets. The following table shows the composition of the allocated amounts and a summary of its calculation methodology:
Assets acquired |  | Valuation method |  | Carrying amounts |  | Fair value adjustment |  | Total fair value
Property, plant and equipment |  | The values of fixed assets were adjusted by the difference between the revalued value of fixed assets and their respective net book value, according to a technical evaluation carried out by an independent appraiser for the groups of assets represented by buildings, vehicles, furniture and fixtures. The useful lives follow the terms disclosed in note 11 |  | 106,695 |  | 195,026 |  | 301,721
Intangible assets |  | Evaluated by the MPEEM method that measures the present value of future income to be generated during the remaining useful life of a given asset. Using the analysis of the company's projected results as a reference, the pre-tax cash flows directly attributable to the asset are calculated, as from the base date stipulated in the evaluation and Incremental Cash Flow, where the economic gain generated by the spread between the contract value and the spot value of energy was the basis of a free cash flow. |  | 104,499 |  | 83,610 |  | 188,109
|  |  |  | 211,194 |  | 278,636 |  | 489,830
3.f) Acquisition of control of the companies Elizabeth Cimentos and Elizabeth Mineração On August 31, 2021, CSN Cimentos acquired 99.97% of the total capital stock of Elizabeth Mineração and 99.99% of the shares of Elizabeth Cimentos, with 88.746% of direct equity interest and 11.254% of indirect equity interest (through Elizabeth Mineração). The assets acquired are located in the northeast region of Brazil. Upon completion of the transaction, CSN Cimentos expects relevant operational, logistical, management and commercial synergies, a better product mix and expansion of its customer base. a) Determination of the purchase price The table below summarizes the price considered for accounting purposes:
Schedule of determination of purchase |  |  |  |  |  |  |  |
Item |  | Comment |  | Elizabeth Cimentos |  | Elizabeth Mineração |  | Reference
Assets transferred |  | A payment in the amount of R$201 milion is being carried out in the transaction. |  | 77,768 |  | 123,947 |  | (i)
Assets transferred |  | Refers to financial adjustment of working capital and debt. |  | (3,914) |  | (5,116) |  | (i)
Equity interests issued |  | Shares issued by Elizabeth Cimentos and acquired by CSN Cimentos. |  | 526,037 |  |  |  | (ii)
Purchase price considered for the business combination |  |  |  | 599,891 |  | 118,831 |  |
| (i) | The transaction included payments by CSN Cimentos of R$77,768 and R$123,947 on August 31, 2021, and an adjustment in the amount of R$3,914 and R$5,116, received in December 2021 related to working capital adjustment provided for in the sale agreement.
| (ii) | In August 2021, Elizabeth Cimentos performed a primary issuance of 2,382,758,512 new common shares, nominative and with no par value, which were subscribed and paid in by CSN Cimentos.
b) Goodwill on acquisition of control of Elizabeth Cimentos and Elizabeth Mineração The transaction generated goodwill for expected future profitability of R$83,266, as shown in the table below:
Schedule of goodwill on acquisition |  |  |  |  |  |
Item |  | Reference |  | Elizabeth Cimentos |  | Elizabeth Mineração
Purchase price considered |  | item (i) and (ii) |  | 599,891 |  | 118,831
Fair value of the assets and liabilities acquired |  |  |  | 516,625 |  | 118,831
Goodwill for future profitability expected |  |  |  | 83,266 |  | -
On the acquisition of Elizabeth Mineração, the price paid was fully allocated to the assets acquired, not generating goodwill for expected future profitability. (i) Fair value of assets and liabilities acquired The following table shows the allocation of the fair value of assets acquired and liabilities assumed at August 31, 2021, considering the direct and indirect interests, calculated based on independent appraisers’ reports.
Schedule of Fair value of assets acquired and liabilities assumed |  |  |  |  |  |  |  |  |  |  |  |
|  | Elizabeth Cimentos |  | Elizabeth Mineração
|  | Carrying amounts |  | Fair value adjustments |  | Total fair value |  | Carrying amounts |  | Fair value adjustments |  | Total fair value
Cash and cash equivalents |  | 52,571 |  |  |  | 52,571 |  | 2,197 |  |  |  | 2,197
Trade receivables |  | 27,571 |  |  |  | 27,571 |  | 1,027 |  |  |  | 1,027
Receivables from related parties |  | 96,374 |  |  |  | 96,374 |  | 9,035 |  |  |  | 9,035
Inventories |  | 44,157 |  |  |  | 44,157 |  | 1,017 |  |  |  | 1,017
Recoverable taxes |  | 18,616 |  |  |  | 18,616 |  | 931 |  |  |  | 931
Short-term investments |  | 14,689 |  |  |  | 14,689 |  |  |  |  |  |
Other assets |  | 17,733 |  |  |  | 17,733 |  | 673 |  |  |  | 673
Investment |  |  |  |  |  |  |  | 40,653 |  | 24,845 |  | 65,498
Property, plant and equipment |  | 373,574 |  | 161,367 |  | 534,941 |  | 15,092 |  | 77,089 |  | 92,181
Intangíible assets |  | 798 |  | 59,456 |  | 60,254 |  | 500 |  | 269,385 |  | 269,885
Total assets acquired |  | 646,083 |  | 220,823 |  | 866,906 |  | 71,125 |  | 371,319 |  | 442,444
Borrowings and financing |  | 198,778 |  |  |  | 198,778 |  | 182,402 |  |  |  | 182,402
Trade payables |  | 22,735 |  |  |  | 22,735 |  | 446 |  |  |  | 446
Taxes payable |  | 19,202 |  |  |  | 19,202 |  | 37,158 |  |  |  | 37,158
Debits with related parties |  |  |  |  |  |  |  | 96,350 |  |  |  | 96,350
Other payables |  | 44,052 |  |  |  | 44,052 |  | 7,257 |  |  |  | 7,257
Total liabilities assumed |  | 284,767 |  |  |  | 284,767 |  | 323,613 |  |  |  | 323,613
Net equity acquired |  | 361,316 |  | 220,823 |  | 582,139 |  | (252,488) |  | 371,319 |  | 118,831
Indirect investiment |  | (40,663) |  | (24,851) |  | (65,514) |  |  |  |  |  |
Net equity acquired |  | 320,653 |  | 195,972 |  | 516,625 |  | (252,488) |  | 371,319 |  | 118,831
The fair value allocation resulted in an adjustment totaling R$567,297, distributed among the main assets of Elizabeth Cimentos and Elizabeth Mineração. The following table shows the composition of the allocated amounts and a summary of its calculation methodology:
Assets acquired |  | Valuation method |  | Carrying amounts |  | Fair value adjustment |  | Total fair value
Property, plant and equipment |  | Valued using the "MARKET APPROACH" method, where the fair value of the asset is estimated by comparing it with similar or comparable assets that have been sold or listed for sale in the primary or secondary market. |  | 388,666 |  | 238,456 |  | 627,122
Mining rights |  | Evaluated by the MPEEM method that measures the present value of future income to be generated during the remaining useful life of a given asset. Using the analysis of the company's projected results as a reference, the pre-tax cash flows directly attributable to the asset are calculated, as of the base date stipulated in the evaluation. |  | 500 |  | 269,385 |  | 269,885
Licenses |  | Valued using the WITH / WITHOUT method, which estimates the intangible value by the difference between discounted cash flow models with and without the asset. |  | 798 |  | 59,456 |  | 60,254
|  |  |  | 389,964 |  | 567,297 |  | 957,261
CSN Cimentos has engaged an independent company to prepare an appraisal report on the tangible and intangible assets and allocation of the excess price paid. After the conclusion of the appraisal report, the Company reclassified the amount of R$27,667 from goodwill to fair value the licenses and mining rights. Accounting Policy
Business combination The acquisition method is used to account for each business combination conducted by the Company. The consideration transferred for acquiring a subsidiary is the fair value of the assets transferred, liabilities incurred, and equity instruments issued by the Company. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement, where applicable. Acquisition-related costs are recognized in profit or loss for the year, as incurred. Identifiable assets acquired and liabilities assumed in a business combination are initially measured at their fair values at the acquisition date. In accordance with IFRS 3, the purchase price is determined by the sum of the assets transferred, liabilities incurred, equity interests issued, non-controlling interest and the fair value of any interest held prior to the transaction. In accordance with IFRS 3, the acquirer must recognize goodwill for expected future profitability on the acquisition date, measured by the amount by which the purchase price exceeds the fair value of the assets and liabilities acquired (purchase price allocation). The goodwill for expected future profitability is recorded in intangible assets and, since it does not have a defined useful life, it is not amortized and the Company is required to perform impairment testing, in accordance to the requirements in IAS 36. The Company has up to 12 months to adjust the measurement of the amounts due to events not considered.

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