XP Inc. Unaudited interim condensed consolidated financial statements for the three months period ended March 31, 2024
XP Inc. and its subsidiaries
Unaudited interim condensed consolidated balance sheets
As of March 31, 2024 and December 31, 2023
In thousands of Brazilian Reais
Assets | Note | March 31, | December 31, | ||||||||
2024 | 2023 | ||||||||||
March 31,2024 | |||||||||||
Cash | 3,938,578 | 3,943,307 | |||||||||
Financial assets | 257,761,295 | 229,197,214 | |||||||||
Fair value through profit or loss | 144,887,279 | 127,015,678 | |||||||||
Securities | 4 | 112,185,069 | 103,282,212 | ||||||||
Derivative financial instruments | 5 | 32,702,210 | 23,733,466 | ||||||||
Fair value through other comprehensive income | 40,310,404 | 44,062,950 | |||||||||
Securities | 4 | 40,310,404 | 44,062,950 | ||||||||
Evaluated at amortized cost | 72,563,612 | 58,118,586 | |||||||||
Securities | 4 | 4,458,663 | 6,855,421 | ||||||||
Securities purchased under resale agreements | 3 | 30,291,271 | 14,888,978 | ||||||||
Securities trading and intermediation | 9 | 2,512,056 | 2,932,319 | ||||||||
Accounts receivable | 639,142 | 681,190 | |||||||||
Loan operations | 7 | 29,541,800 | 28,551,935 | ||||||||
Other financial assets | 15 | 5,120,680 | 4,208,743 | ||||||||
Other assets | 9,005,592 | 7,811,962 | |||||||||
Recoverable taxes | 436,769 | 245,214 | |||||||||
Rights-of-use assets | 12 | 250,711 | 281,804 | ||||||||
Prepaid expenses | 8 | 4,476,586 | 4,418,263 | ||||||||
Other | 3,841,526 | 2,866,681 | |||||||||
Deferred tax assets | 17 | 2,183,746 | 2,104,128 | ||||||||
Investments in associates and joint ventures | 11 | 3,114,918 | 3,108,660 | ||||||||
Property and equipment | 12 | 394,788 | 373,362 | ||||||||
Goodwill and Intangible assets | 12 | 2,522,723 | 2,502,045 | ||||||||
Total assets | 278,921,640 | 249,040,678 | |||||||||
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
XP Inc. and its subsidiaries
Unaudited interim condensed consolidated balance sheets
As of March 31, 2024 and December 31, 2023
In thousands of Brazilian Reais
Liabilities and equity | Note | March 31, | December 31, | |||||||||
2024 | 2023 | |||||||||||
Financial liabilities | 198,443,725 | 171,237,146 | ||||||||||
Fair value through profit or loss | 51,916,928 | 45,208,490 | ||||||||||
Securities | 4 | 17,528,172 | 20,423,074 | |||||||||
Derivative financial instruments | 5 | 34,388,756 | 24,785,416 | |||||||||
Evaluated at amortized cost | 146,526,797 | 126,028,656 | ||||||||||
Securities sold under repurchase agreements | 3 | 49,054,325 | 33,340,511 | |||||||||
Securities trading and intermediation | 9 | 16,394,818 | 16,943,539 | |||||||||
Financing instruments payable | 13 | 63,037,172 | 60,365,590 | |||||||||
Accounts payables | 954,009 | 948,218 | ||||||||||
Borrowings | 14 | 2,266,614 | 2,199,422 | |||||||||
Other financial liabilities | 15 | 14,819,859 | 12,231,376 | |||||||||
Other liabilities | 59,934,949 | 58,266,331 | ||||||||||
Social and statutory obligations | 625,433 | 1,146,127 | ||||||||||
Taxes and social security obligations | 500,996 | 559,647 | ||||||||||
Retirement plans and insurance liabilities | 16 | 58,654,362 | 56,409,075 | |||||||||
Provisions and contingent liabilities | 20 | 101,493 | 97,678 | |||||||||
Other | 52,665 | 53,804 | ||||||||||
Deferred tax liabilities | 17 | 118,193 | 86,357 | |||||||||
Total liabilities | 258,496,867 | 229,589,834 | ||||||||||
Equity attributable to owners of the Parent company | 18 | 20,421,216 | 19,449,352 | |||||||||
Issued capital | 26 | 26 | ||||||||||
Capital reserve | 19,332,457 | 19,189,994 | ||||||||||
Other comprehensive income | 186,171 | 376,449 | ||||||||||
Treasury shares | (127,454) | (117,117) | ||||||||||
Retained earnings | 1,030,016 | - | ||||||||||
Non-controlling interest | 3,557 | 1,492 | ||||||||||
Total equity | 20,424,773 | 19,450,844 | ||||||||||
Total liabilities and equity | 278,921,640 | 249,040,678 | ||||||||||
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
XP Inc. and its subsidiaries
Unaudited interim condensed consolidated statements of income and of comprehensive income
For the three months period ended March 31, 2024 and 2023 In thousands of Brazilian Reais, except earnings per share
Net revenue from services rendered
Net income/(loss) from financial instruments at amortized cost and at fair value through other comprehensive income
Net income/(loss) from financial instruments at fair value through profit or loss
Three months period ended | |||||||
March 31, | |||||||
Note | 2024 | 2023 | |||||
21 | 1,623,851 | 1,345,984 | |||||
21 | 227,251 | 502,113 | |||||
21 | 2,201,754 | 1,285,892 | |||||
Total revenue and income | 4,052,856 | 3,133,989 | ||
Operating costs | 22 | (1,218,816) | (1,016,525) | |
Selling expenses | 23 | (32,054) | (14,942) | |
Administrative expenses | 23 | (1,451,651) | (1,093,939) | |
Other operating income (expenses), net | 24 | 9,221 | 18,881 | |
Expected credit losses | 10 | (96,870) | (67,634) | |
Interest expense on debt | (181,337) | (162,828) | ||
Share of profit (loss) in joint ventures and associates | 11 | 7,104 | 19,146 | |
Income before income tax | 1,088,453 | 816,148 | ||
Income tax credit (expense) | 17 | (58,898) | (20,203) | |
Net income for the period
Other comprehensive income
Items that can be subsequently reclassified to income
Foreign exchange variation of investees located abroad Gains (losses) on net investment hedge
Changes in the fair value of financial assets at fair value through other comprehensive income
1,029,555795,945
14,796(17,996)
(12,561)20,871
(171,480)80,384
Other comprehensive income (loss) for the period, net of tax | (169,245) | 83,259 | ||||
Total comprehensive income for the period | 860,310 | 879,204 | ||||
Net income attributable to: | ||||||
Owners of the parent company | 1,030,016 | 795,020 | ||||
Non-controlling interest | (461) | 925 | ||||
Total comprehensive income attributable to: | ||||||
Owners of the parent company | 860,771 | 878,279 | ||||
Non-controlling interest | (461) | 925 | ||||
Earnings per share from total income attributable to the | ||||||
ordinary equity holders of the company | 1.8781 | 1.4847 | ||||
Basic earnings per share | 26 | |||||
Diluted earnings per share | 26 | 1.8503 | 1.4823 |
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
XP Inc. and its subsidiaries
Unaudited interim condensed consolidated statements of changes in equity
For the three months period ended March 31, 2024 and 2023
In thousands of Brazilian Reais
Unaudited interim condensed consolidated statements of changes in equity | ||||||||||||||||||||||||||||
Attributable to owners of the parent | ||||||||||||||||||||||||||||
Capital reserve | Other | |||||||||||||||||||||||||||
Additional | comprehensive | Non- | ||||||||||||||||||||||||||
Notes | Issued | paid-in | Other | income and | Retained | Treasury | Controlling | Total | ||||||||||||||||||||
Capital | capital | Reserves | Other | Earnings | Shares | Total | interest | Equity | ||||||||||||||||||||
Balances as of December 31, 2022 | 24 | 6,986,447 | 12,169,935 | (133,909) | - | (1,986,762) | 17,035,735 | 6,475 | 17,042,210 | |||||||||||||||||||
Comprehensive income for the period | ||||||||||||||||||||||||||||
Net income for the period | - | - | - | - | 795,020 | - | 795,020 | 925 | 795,945 | |||||||||||||||||||
Other comprehensive income, net | - | - | - | 83,259 | - | - | 83,259 | - | 83,259 | |||||||||||||||||||
Transactions with shareholders - | ||||||||||||||||||||||||||||
contributions and distributions | ||||||||||||||||||||||||||||
Share based plan | 25 | - | - | 38,156 | - | - | - | 38,156 | - | 38,156 | ||||||||||||||||||
Other changes in equity, net | - | - | - | 2,339 | - | - | 2,339 | 119 | 2,458 | |||||||||||||||||||
Treasury shares | 18c | - | - | - | - | - | (915,859) | (915,859) | - | (915,859) | ||||||||||||||||||
Allocations of the net income for the | ||||||||||||||||||||||||||||
period | ||||||||||||||||||||||||||||
Dividends distributed | - | - | - | - | - | - | - | (306) | (306) | |||||||||||||||||||
Balances as of March 31, 2023 | 24 | 6,986,447 | 12,208,091 | (48,311) | 795,020 | (2,902,621) | 17,038,650 | 7,213 | 17,045,863 | |||||||||||||||||||
Balances as of December 31, 2023 | 26 | 6,417,115 | 12,772,879 | 376,449 | - | (117,117) | 19,449,352 | 1,492 | 19,450,844 | |||||||||||||||||||
Comprehensive income for the period | ||||||||||||||||||||||||||||
Net income for the period | - | - | - | - | 1,030,016 | - | 1,030,016 | (461) | 1,029,555 | |||||||||||||||||||
Other comprehensive income, net | - | - | - | (169,245) | - | - | (169,245) | - | (169,245) | |||||||||||||||||||
Transactions with shareholders - | ||||||||||||||||||||||||||||
contributions and distributions | ||||||||||||||||||||||||||||
Share based plan | 25 | - | 59 | 142,404 | - | - | - | 142,463 | 2,637 | 145,100 | ||||||||||||||||||
Other changes in equity, net | - | - | - | (21,033) | - | - | (21,033) | - | (21,033) | |||||||||||||||||||
Treasury shares | 18c | - | - | - | - | - | (10,337) | (10,337) | - | (10,337) | ||||||||||||||||||
Allocations of the net income for the | ||||||||||||||||||||||||||||
period | ||||||||||||||||||||||||||||
Dividends distributed | - | - | - | - | - | - | - | (111) | (111) | |||||||||||||||||||
Balances as of March 31, 2024 | 26 | 6,417,174 | 12,915,283 | 186,171 | 1,030,016 | (127,454) | 20,421,216 | 3,557 | 20,424,773 |
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
XP Inc. and its subsidiaries
Unaudited interim condensed consolidated statements of cash flows
For the three months period ended March 31, 2024 and 2023
In thousands of Brazilian Reais
Three months ended | ||||||
March 31, | ||||||
Note | 2024 | 2023 | ||||
Operating activities | ||||||
Income before income tax | 1,088,453 | 816,148 | ||||
Adjustments to reconcile income before income taxes | ||||||
Depreciation of property, equipment and right-of-use assets | 12 | 28,918 | 26,516 | |||
Amortization of intangible assets | 12 | 39,142 | 21,326 | |||
Loss on write-off of right of use assets, property, equipment and intangible assets | 12 | 15,813 | 5,325 | |||
and lease, net | ||||||
Share of profit or (loss) in joint ventures and associates | 11 | (7,104) | (19,146) | |||
Income from share in the net income of associates measured at fair value | 11 | 15 | - | |||
Expected credit losses on financial assets | 96,870 | 33,881 | ||||
Provision for contingencies, net | 20 | (11,572) | 34,660 | |||
Net foreign exchange differences | 159,575 | (210,419) | ||||
Share based plan | 25 | 145,100 | 38,156 | |||
Interest accrued | 182,512 | 154,183 | ||||
(Gain) / Loss on the disposal of investments | - | 14,083 | ||||
Changes in assets and liabilities | ||||||
Securities (assets and liabilities) | (8,709,462) | 4,112,334 | ||||
Derivative financial instruments (assets and liabilities) | 622,005 | 701,030 | ||||
Securities trading and intermediation (assets and liabilities) | (135,724) | (135,413) | ||||
Securities purchased (sold) under resale (repurchase) agreements | 1,314,890 | (5,969,509) | ||||
Accounts receivable | 37,352 | (8,431) | ||||
Loan operations | (1,045,877) | (911,295) | ||||
Prepaid expenses | (58,323) | (10,151) | ||||
Other assets and other financial assets | (4,256,116) | 334,362 | ||||
Accounts payable | 5,210 | (32,002) | ||||
Financing instruments payable | 2,450,655 | 2,690,874 | ||||
Social and statutory obligations | (520,694) | (464,824) | ||||
Tax and social security obligations | 30,481 | (13,087) | ||||
Retirement plans liabilities | 2,245,287 | 2,072,434 | ||||
Other liabilities and other financial liabilities | 3,214,432 | 312,033 | ||||
Cash (used in)/from operations | (3,068,162) | 3,593,068 | ||||
Income tax paid | (268,007) | (157,926) | ||||
Contingencies paid | 20 | (12) | (199) | |||
Interest paid | (10,064) | (6,883) | ||||
Net cash flows (used in)/from operating activities | (3,346,245) | 3,428,060 | ||||
Investing activities | ||||||
Acquisition of property and equipment | 12 | (32,965) | (1,929) | |||
Acquisition of intangible assets | 12 | (13,775) | (8,348) | |||
Disposal of investments | 11 | - | 19,338 | |||
Acquisition of associates | 30(ii) | (670,464) | - | |||
Net cash flows (used in)/from investing activities | (717,204) | 9,061 | ||||
Financing activities | ||||||
Acquisition of treasury shares | 18 | (10,337) | (915,859) | |||
Issuance of debt securities | 30 | - | 134,598 | |||
Payments of borrowings and lease liabilities | 30 | (53,441) | (27,477) | |||
Transactions with non-controlling interests | - | 119 | ||||
Dividends paid to non-controlling interests | (111) | (306) | ||||
Net cash flows (used in) financing activities | (63,889) | (808,925) | ||||
Net increase in cash and cash equivalents | (4,127,338) | 2,628,196 | ||||
Cash and cash equivalents at the beginning of the period | 9,210,482 | 4,967,480 | ||||
Effects of exchange rate changes on cash and cash equivalents | 9,484 | (14,005) | ||||
Cash and cash equivalents at the end of the period | 5,092,628 | 7,581,671 | ||||
Cash | 3,938,578 | 3,088,840 | ||||
Securities purchased under agreements to resell | 3 | 1,005,478 | 4,126,706 | |||
Bank deposit certificates | 4 | 58,572 | 236,125 | |||
Other deposits at Brazilian Central Bank | 90,000 | 130,000 | ||||
s |
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
XP Inc. and its subsidiaries
Notes to unaudited interim condensed consolidated financial statements
As of March 31, 2024
In thousands of Brazilian Reais, unless otherwise stated
1. Operations
XP Inc. (the "Company") is a Cayman Island exempted company with limited liability, incorporated on August 29, 2019. The registered office of the Company is 20, Genesis Close, in George Town, Grand Cayman.
XP Inc. is currently the entity which is registered with the U.S. Securities and Exchange Commission ("SEC"). The common shares are trading on the Nasdaq Global Select Market ("NASDAQ-GS") under the symbol "XP".
XP Inc. is a holding company controlled by XP Control LLC, which holds 66.5% of voting rights and is controlled by a group of individuals.
XP Inc. and its subsidiaries (collectively, "Group" or "XP Group") is a leading, technology-driven financial services platform and a trusted provider of low-fee financial products and services in Brazil. XP Group are principally engaged in providing its customers, represented by individuals and legal entities in Brazil and abroad, various financial products, services, digital content and financial advisory services, mainly acting as broker-dealer, including securities brokerage, private pension plans, commercial and investment banking products such as loan operations, transactions in the foreign exchange markets and deposits, through our brands that reach clients directly and through network of Independent Financial Advisers ("IFAs").
These unaudited interim condensed consolidated financial statements as of March 31, 2024, were approved by the Board of Director's meeting on May 13, 2024 and updated by subsequent events through May 21, 2024 as approved by the executive management.
1.1 Share buy-back program
In May 2022, the Board of Directors approved a share buy-back program. Under the program, XP may repurchase up to the amount in dollars equivalent to R$1.0 billion of its outstanding Class A common shares over a period beginning on May 12, 2022, continuing until the earlier of the completion of the repurchase or May 12, 2023, depending upon market conditions.
On November 4, 2022, the Board of Directors approved an amendment to the share buy-back program. Under the amended program, XP Inc may repurchase up to the amount in dollars equivalent to R$2.0 billion of its outstanding Class A common shares (therefore, an increase of the maximum amount of R$1.0 billion compared to the original program). The program period has not been amended, continuing until the earlier of the completion of the repurchase or May 12, 2023, depending upon market conditions.
The repurchase limit of R$ 2.0 billion was reached on March 31, 2023, and, therefore, the share buy-back program terminated. At the end of the share buy-back program, the Company repurchased 25,037,192 shares (equivalent to R$ 2,059 million or US$ 394 million), which were acquired at an average price of US$ 15.76 per share, with prices ranging from US$ 10.69 to US$ 24.85.
On February 20, 2024, the Board of Directors approved a new share repurchase program, which aims to neutralize future shareholder dilution due to the vesting of Restricted Stock Units (RSUs) from the Company´s long-term incentive plan. The Company proposes to undertake a share repurchase program pursuant to which the Board can annually, in each calendar year, approve the repurchase by the Company of a number of Class A common shares equal to the number of RSUs that have vested or will vest during the current calendar year.
Under the approved repurchase program for 2024, XP may repurchase up to 2,500,000 Class A common shares within the period started on February 28, 2024, and ending on December 27, 2024. As of March 31, 2024, the company repurchased 81,250 shares (equivalent to R$ 10 million or US$ 2 million), which were acquired at an average price of US$ 25.48 per share, with prices ranging from US$ 25.04 to US$ 26.11.
1.2 Cancellation of treasury shares
On April 5, 2023, the Company´s Board of Directors approved the cancellation of 31,267,095 Class A shares, totaling an amount of R$ 2,785,504 (5.6% of total issued shares, on this date) held by the Company in treasury. Total issued shares count, on April 5, 2023, went from 560,534,012 to 529,266,917 after cancellation.
1.3 Termination of shareholders agreement between XP Control LLC, General Atlantic (XP) Bermuda, Iupar Group, ITB Holding Ltd. and Itaú Unibanco Holding S.A.
On July 10, 2023, XP Inc. announced the termination of its shareholders agreement executed between XP Control LLC, General Atlantic (XP) Bermuda, Iupar Group, ITB Holding Ltd., and Itaú Unibanco Holding S.A., originally expected to continue until October 2026. As a result of the termination, Iupar Group will no longer have the right to nominate members to XP Inc´s board of directors, which was reduced from 11 to 9 members.
XP Inc. and its subsidiaries
Notes to unaudited interim condensed consolidated financial statements
As of March 31, 2024
In thousands of Brazilian Reais, unless otherwise stated
1.4 Corporate reorganization
In order to improve corporate structure, Group´s capital and cash management, XP Inc is conducting entity reorganizations, as follows:
- Inversion of financial institutions in Brazil. At the end of the reorganization XP CCTVM will become a wholly owned subsidiary of Banco XP. As of March 31, 2024, up to the date of these consolidated financial statements, the corporate reorganization is not fully concluded and is expected to be completed by the end of 2024.
- Reorganization of international operations. The entities XP Holding International LLC, XP Advisory US and XP Holding UK Ltd, which are no longer wholly owned subsidiaries of XP Investimentos S.A., and are now directly owned by XP Inc. The transaction was completed on October 20, 2023.
No material impacts on Group's financial position and results of operations are expected due to the previously described corporate reorganization.
2. Basis of preparation and changes to the Group's accounting policies
- Basis of preparation
The unaudited interim condensed consolidated balance sheet as of March 31, 2024, and the unaudited interim condensed consolidated statements of income and comprehensive income, changes in equity and cash flow for the three months period ended March 2024 and 2023 (the "financial statements") have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB").
The unaudited interim condensed consolidated financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value.
The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual consolidated financial statements as of December 31, 2023. The list of notes that were not presented in this unaudited interim condensed is described below:
Note to financial statements of | Description | |||
December 31, 2023 | ||||
3. | Summary of significant accounting policies | |||
4. | Significant accounting judgements, estimates and assumptions | |||
5. | Group structure | |||
11. | Accounts receivable | |||
12. | Recoverable taxes | |||
21. | Social and Statutory obligations | |||
22. | Tax and social security obligations | |||
26. (a) | Key-person management compensation |
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the new accounting policies adopted for the current interim reporting period, see Note 2 (b).
The unaudited interim condensed consolidated financial statements are presented in Brazilian reais ("R$"), which is the Group's presentation currency and all amounts disclosed in the financial statements and notes have been rounded off to the nearest thousand currency units unless otherwise stated.
XP Inc. and its subsidiaries
Notes to unaudited interim condensed consolidated financial statements
As of March 31, 2024
In thousands of Brazilian Reais, unless otherwise stated
b) New standards, interpretations and amendments
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended December 31, 2023.
IFRS 18 - Presentation and Disclosure of Financial Statements: The standard replaces "IAS 1 Presentations of Financial Statements", and also changes other standards such as "IAS 7 - Statement of Cash Flows", "IFRS 12 - Disclosures of Interests in Other Entities", "IAS 33 - Earnings per Share", "IAS 34 - Intermediate Statement", "IAS 8 - Accounting Policies, Estimate Changes and Error Rectification", and "IFRS 7 - Financial Instruments, Disclosure", aiming to improve the communication of information in the financial statements, with a special focus on income statements and notes. The mandatory initial adoption of this standard is scheduled for January 1, 2027.
Amendments to IAS 1 - Classification of liabilities as current or non-current: The changes aim to promote consistency in the application of the requirements, helping companies to determine whether, in the statement of financial position, debts and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current, being effective for annual years beginning on or after January 1, 2024.
Amendments to IAS 1 - Non-current Liabilities with Covenants: The amendment clarifies how the conditions that an entity must comply with within twelve months after the reporting period affect the classification of liabilities, being effective for annual reporting periods beginning on or after 1 January 2024.
Amendments to IAS 12 - International Tax Reform - Pillar Two Model Rules: The amendment provides a temporary exception from requirements for initial application relating to deferred tax assets and liabilities related to Pillar Two income tax for the interim consolidated financial statements, but is mandatory for annual reporting periods from January 1, 2023. The Group has assessed the impacts of applying these changes and concluded that there are no impacts on these unaudited interim condensed consolidated financial statements.
c) Basis of consolidation
There were no changes since December 31, 2023, in the accounting practices adopted for consolidation of the Company's direct and indirect interests in its subsidiaries for the purposes of these unaudited interim condensed consolidated financial statements.
- Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group.
Intercompany transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of income and of comprehensive income, statement of changes in equity and balance sheet respectively.
XP Inc. and its subsidiaries
Notes to unaudited interim condensed consolidated financial statements
As of March 31, 2024
In thousands of Brazilian Reais, unless otherwise stated
- Associates
Associates are companies in which the investor has a significant influence but does not hold control. Investments in these companies are initially recognized at cost of acquisition and subsequently accounted for using the equity method. Investments in associates include the goodwill identified upon acquisition, net of any cumulative impairment loss.
Under the equity method of accounting, the investments are initially recognized at cost and adjusted thereafter to recognize the Group's share of the post-acquisition profits or losses of the investee in the Group's income statement, and the Group's share of movements in other comprehensive income of the investee in the Group's other comprehensive income. Dividends received or receivable from associates are recognized as a reduction in the carrying amount of the investment.
Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in these entities. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group.
If its interest in the associates decreases, but the Group retains significant influence or joint control, only the proportional amount of the previously recognized amounts in other comprehensive income is reclassified in income, when appropriate.
- Interests in associates measured at fair value
The Group has investments in associates measured at fair value in accordance with item 18 of IAS 28 - Investments in Associates and Joint Ventures. These investments are held through XP FIP Managers and XP FIP Endor, which are venture capital organizations. In determining whether the funds meet the definition of venture capital organizations, management considers the investment portfolio features and objectives. The portfolio classified in this category has the objective to generate growth in the value of its investments in the medium term and have an exit strategy. Additionally, the performance of these portfolios is evaluated and managed considering a fair value basis of each investment.
- Business combinations and other developments
- Business combinations
- Banco Modal S.A. ("Banco Modal")
On January 6, 2022, XP Inc entered into a binding agreement to acquire up to 100% of Banco Modal's total shares, in a non-cash equity exchange transaction.
The transaction was approved by Administrative Council for Economic Defense (CADE) in July 2022 and by Brazilian Central Bank (BACEN) in June 2023. The closing occurred on July 1, 2023, the date on which the Group obtained control of 704,200,000 issued shares of Banco Modal S.A. Under the terms of this transaction, on the closing date, Banco Modal's former shareholders received 18,717,771 of newly issued XP Inc's BDRs at the price of R$ 112.05 per unit of BDRs, paid in consideration for the acquisition of 100% of Banco Modal's shares. This quantity of BDRs reflects the initial consideration of 19.5 million BDRs adjusted for the interest on equity amount of R$ 82,052, distributed by Banco Modal between the signing date of the binding agreement and the closing date of the transaction.
On the settlement date with Banco Modal's former shareholders, the transaction was recorded in accordance with Banco Modal's net assets fair value as of July 1, 2023, with an allocation of the purchase price between (i) the amount of fair value of the identifiable assets acquired and liabilities assumed and (ii) the goodwill arising at this date, corresponding to the difference between the total consideration transferred and the fair value of identifiable assets acquired and liabilities assumed. The total consideration transferred corresponds to the fair value of the 18,717,771 XP Inc BDR's at the closing date for an amount of R$ 2,097,326. As of March 31, 2024, the goodwill is R$ 1,278,596 and is attributable to the workforce and the high profitability of the acquired business.
- Other developments
- Minority stake acquisitions
On December 29, 2023, the Group entered into agreements, through its subsidiary XP Controle 5 Participações Ltda., to acquire minority interests in Monte Bravo JV S.A. ("Monte Bravo"), Blue3 S.A. ("Blue3"), and Ável Participações Ltda. ("Ável"). The total fair value consideration recorded for those acquisitions was R$ 834,743, including preliminary goodwill in a total amount of R$ 537,671. As of March 31, 2024, from the total consideration of R$ 834,743: (i) 45,000 was paid during 2023, (ii) 670,464 was paid during 2024 (including monetary correction on this amount), (iii) there is a remaining amount of R$ 72,163 payable (of which R$ 36,081 will be paid in January 2025 and R$ 36,082 will be paid in January 2026) recorded through accounts payable and (iv) there is an amount equal to R$ 50,000 recorded through contingent consideration (Note 15(b)).
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
XP Inc. published this content on 20 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 May 2024 20:51:13 UTC.