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v3.23.1

Provision for tax, civil and labor losses and Judicial deposits and escrow accounts | 12 Months Ended
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Dec. 31, 2022
Provision for tax, civil and labor losses and Judicial deposits and escrow accounts |
Provision for tax, civil and labor losses and Judicial deposits and escrow accounts | 22 Provision for tax, civil and labor losses and Judicial deposits and escrow accounts The Company classifies the likelihood of loss in judicial/administrative proceedings in which it is a defendant. Provisions are recorded for contingencies classified as probable loss in an amount that Management, in conjunction with its legal advisors, believes is enough to cover probable losses or when related to contingences resulting from business combinations. In connection with the acquisition of Somos Group (Vasta’s predecessor) by Cogna Group, provisions for contingent liabilities assumed by Cogna were recognized when potential non-compliance with labor and civil legislation arising from past practices of subsidiaries acquired were identified. Thus, at the acquisition date, Cogna reviewed all proceedings for which liabilities were transferred to assess whether there was a present obligation and if the fair value could be measured reliably. The contingent liabilities are composed as follows: a. Composition
| December 31, 2022 |  |  | December 31, 2021 |
Proceedings whose likelihood of loss is probable |  |  |  |  |
Tax proceedings (i) | 622,440 |  |  | 607,084 |
Labor proceedings (ii) | 25,812 |  |  | 38,159 |
Civil proceedings | 496 |  |  | 376 |
| 648,748 |  |  | 645,619 |
Liabilities assumed in Business Combination |  |  |  |  |
Labor proceedings (ii) | 1,755 |  |  | - |
Civil proceedings | - |  |  | 1,231 |
Tax proceedings | 749 |  |  | - |
| 2,504 |  |  | 1,231 |
Total of provision for tax, civil and labor losses | 651,252 |  |  | 646,850 |
(i) Primarily refers to income tax positions taken by Somos and the Company in connection with a corporate restructuring held by the predecessor in 2010, In 2018, given a tax assessment via an Infraction Notice received by the predecessor for certain periods opened for tax audit coupled with unfavorable case law on a similar tax case also reached in 2018, the Company reassessed this income tax position and recorded a liability, including interest and penalties. (ii) The Company is a party to labor demands, which mostly refer to proportional vacation, salary difference, night shift premium, overtime and social charges, among others. There are no individual labor demands with material amounts that require specific disclosure. The changes in provision for the years ended December 31, 2022 and 2021 were as follows:
|  | December 31, 2021 |  |  | Business combination |  |  | Additions |  |  | Reversals |  |  | Interest |  |  | Payments |  |  | Decem ber 31, 2022 |
Tax proceedings |  | 607,084 |  |  | 749 |  |  | 2,904 |  |  | (27,790 | ) |  | 41,261 |  |  | (1,019 | ) |  | 623,189 |
Labor proceedings |  | 38,159 |  |  | 1,755 |  |  | 3,376 |  |  | (16,045 | ) |  | 776 |  |  | (454 | ) |  | 27,567 |
Civil proceedings |  | 1,607 |  |  | - |  |  | 368 |  |  | (1,615 | ) |  | 26 |  |  | 110 |  |  | 496 |
Total |  | 646,850 |  |  | 2,504 |  |  | 6,648 |  |  | (45,450 | ) |  | 42,063 |  |  | (1,363 | ) |  | 651,252 |
Reconciliation with profit or loss for the period |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Finance expense |  |  |  |  |  |  |  | - |  |  | - |  |  | (42,063 | ) |  |  |  |  |  |
General and administrative expenses |  |  |  |  |  |  |  | (6,648 | ) |  | 21,747 |  |  | - |  |  |  |  |  |  |
Income tax and social contribution |  |  |  |  |  |  |  | - |  |  | 23,703 |  |  | - |  |  |  |  |  |  |
Total |  |  |  |  |  |  |  | (6,648 | ) |  | 45,450 |  |  | (42,063 | ) |  |  |  |  |  |
| December 31, 2020 |  |  | Business combination |  |  | Additions |  |  | Reversals |  |  | Interest |  |  | Payments |  |  | December 31, 2021 |
Tax proceedings | 575,724 |  |  | - |  |  | 16 |  |  | (262 | ) |  | 31,623 |  |  | (17 | ) |  | 607,084 |
Labor proceedings | 37,896 |  |  | - |  |  | 3,468 |  |  | (5,294 | ) |  | 2,636 |  |  | (547 | ) |  | 38,159 |
Civil proceedings | 313 |  |  | 1,231 |  |  | 110 |  |  | (24 | ) |  | 41 |  |  | (64 | ) |  | 1,607 |
Total | 613,933 |  |  | 1,231 |  |  | 3,594 |  |  | (5,580 | ) |  | 34,300 |  |  | (628 | ) |  | 646,850 |
Reconciliation with profit or loss for the period |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Finance costs |  |  |  |  |  |  | - |  |  | - |  |  | (34,300 | ) |  |  |  |  |  |
General and administrative expenses |  |  |  |  |  |  | (3,594 | ) |  | 5,580 |  |  | - |  |  |  |  |  |  |
Total |  |  |  |  |  |  | (3,594 | ) |  | 5,580 |  |  | (34,300 | ) |  |  |  |  |  |
b. Judicial Deposits and Escrow Accounts Judicial deposits and escrow accounts recorded as non-current assets are as follows:
| December 31, 2022 |  |  | December 31, 2021 |
Tax proceedings | 2,126 |  |  | 2,300 |
Indemnification asset -Former owner | 1,801 |  |  | 1,998 |
Indemnification asset – Related parties (i) | 180,417 |  |  | 160,470 |
Escrow-account (ii) | 10,515 |  |  | 14,055 |
| 194,859 |  |  | 178,824 |
(i) Refers to an indemnification asset of the seller in connection with the acquisition of Somos (Vasta’s Predecessor) by Cogna Group (Vasta’s Parent Company) and recognized at the date of the business combination, in order to indemnify the Company for all losses that may be incurred in connection with all contingencies or lawsuits, substantially tax proceedings related to business combinations up to the maximum amount of R$180,417 (R$ 160,470 on December 31, 2021). See Note 21. This asset is indexed to CDI (Certificates of Interbank Deposits). (ii) Refers to guarantees received as a consequence of business combinations, in connection with contingencies whose likelihood of loss is probable, and for which the former owners are liable. According to the Sale Agreement, these former owners will reimburse the Company in case payments are required and if those contingencies materialize.

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