As filed with the Securities and Exchange Commission on May 30, 2018.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________
FORM 20-F/A
(Amendment No. 1)
¨ |
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES |
|
OR |
x |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
|
OR |
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
|
OR |
¨ |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
Commission file number 001-32221
Gol Linhas Aéreas Inteligentes S.A.
(Exact name of Registrant as specified in its charter)
Gol Intelligent Airlines Inc.
(Translation of Registrant’s name into English)
_________________
The Federative Republic of Brazil
(Jurisdiction of incorporation or organization)
Richard F. Lark, Jr.
+55 11 5098-7881
Fax: +55 11 5098-2341
E-mail: ri@voegol.com.br
Praça Comandante Linneu Gomes, S/N Portaria 3,
Jardim Aeroporto
04626-020 São Paulo, São Paulo
Federative Republic of Brazil
(+55 11 2128-4700)
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
___________________________________________
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class: |
Name of each exchange on which registered: |
Preferred Shares, without par value |
New York Stock Exchange* |
1
* Not for trading purposes, but only in connection with the trading on the New York Stock Exchange of American Depositary Shares representing those preferred shares.
___________________________________________
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
___________________________________________
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
___________________________________________
Number of outstanding shares of each class of stock of Gol Linhas Aéreas Inteligentes S.A. as of December 31, 2017:
2,863,682,710 Shares of Common Stock
265,899,432 Shares of Preferred Stock
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
If this is an annual or transition report, indicate by check mark if the Registrant is not required to file pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer ¨ Accelerated Filer x Non-accelerated Filer ¨ Emerging growth company ¨
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨ |
International Financial Reporting Standards as issued by the International Accounting Standards Board x |
Other ¨ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow.
Item 17 ¨ Item 18 ¨
If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
2
Explanatory Note
This Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2017 of Gol Linhas Aéreas Inteligentes S.A. (the “Company”), filed with the Securities and Exchange Commission on April 30, 2018 (the “Annual Report”), is being filed for the following reasons:
(i) To file Exhibit 101, which presents financial information of the Company in eXtensible Business Reporting Language (XBRL). “Item 19. Exhibits” of the Annual Report is hereby amended to include the following exhibits:
Exhibit Number
|
Description
|
101.INS |
XBRL Instance Document. |
101.SCH |
XBRL Taxonomy Extension Schema. |
101.CAL |
XBRL Taxonomy Extension Scheme Calculation Linkbase. |
101.DEF |
XBRL Taxonomy Extension Scheme Definition Linkbase. |
101.LAB |
XBRL Taxonomy Extension Scheme Label Linkbase. |
101.PRE |
XBRL Taxonomy Extension Scheme Presentation Linkbase. |
(ii) To amend and restate the second footnote under the table “Reconciliation of Net Income (Loss) to EBITDA and EBITDAR” in “Item 3. Key Information—A. Selected Financial Data,” on page 7 of the Annual Report, as follows:
(2) We calculate EBITDA as net income (loss) plus financial income (expense), net, income taxes and depreciation and amortization. We calculate EBITDAR as net income (loss) plus financial income (expense), net, income taxes, depreciation and amortization and aircraft rent expenses. EBITDA and EBITDAR are not measures of financial performance recognized under Brazilian GAAP or IFRS, nor should they be considered as alternatives to net income (loss) as measures of operating performance, or as alternatives to operating cash flows or as measures of liquidity. EBITDA and EBITDAR are not calculated using a standard methodology and may not be comparable to the definition of EBITDA or EBITDAR or similarly titled measures used by other companies. Because our calculation of EBITDA eliminates financial income (expense), net, income taxes and depreciation and amortization, we believe that our EBITDA provides an indication of our general economic performance, without giving effect to interest rate or exchange rate fluctuations, changes in income and social contribution tax rates or depreciation and amortization. Because our calculation of EBITDAR eliminates aircraft rent expenses, which are a normal and recurring cash operating expense necessary to operate our business, our EBITDAR’s usefulness is especially limited and we present EBITDAR solely as a valuation metric. You should not consider EBITDAR as a measure of our general economic performance.
(iii) To file amended consolidated financial statements, which reflect the following two amendments:
(a) To include additional disclosure on total net income (loss) attributable to equity holders of the parent and the Company’s calculation of earnings (loss) per share in explanatory note “13. Earnings (loss) per share” to the Company’s audited consolidated financial statements for the years ended December 31, 2017, 2016 and 2015, on page F-36 of the Annual Report, to clarify that the Company’s preferred shares carry economic rights, including dividend rights, 35 times those of common shares. Accordingly, net income (loss) for the year attributable to equity holders of the parent is allocated in proportion to equity holders’ interest in common shares and preferred shares.
The following table sets forth net income (loss) for the year attributable to equity holders of the parent for the periods indicated:
December 31, 2017 |
|
December 31, 2016 |
|
December 31, 2015 |
| ||||
|
Common |
Preferred |
Total |
Common |
Preferred |
Total |
Common |
Preferred |
Total |
Numerator |
|
|
|
|
|
|
| ||
Net income (loss) for the year attributable to equity holders of the parent |
7,869 |
11,315 |
19,184 |
353,129 |
496,490 |
849,619 |
(2,123,945) |
(2,336,938) |
(4,460,883) |
|
7,869 |
11,315 |
19,184 |
353,129 |
496,490 |
849,619 |
(2,123,945) |
(2,336,938) |
(4,460,883) |
Denominator |
|
|
|
|
|
|
|
|
|
Weighted average number of outstanding shares (in thousands)* |
4,981,350 |
204,664 |
|
5,035,037 |
202,261 |
|
5,035,037 |
158,285 |
|
Effects of dilution from stock options |
- |
2,614 |
|
- |
347 |
|
- |
- |
|
Adjusted weighted average number of outstanding shares and diluted presumed conversions (in thousands)* |
4,981,350 |
207,278 |
|
5,035,037 |
202,608 |
|
5,035,037 |
158,285 |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
0.002 |
0.055 |
|
0.070 |
2.455 |
|
(0.422) |
(14.764) |
|
Diluted earnings (loss) per share |
0.002 |
0.055 |
|
0.070 |
2.450 |
|
(0.422) |
(14.764) |
|
(*) Weighted average considers the split of common shares approved at the Company’s extraordinary shareholders’ meeting on March 23, 2015, in accordance with IAS 33. Earnings per share presented herein reflects the economic rights attributable to each class of shares.
(b) To replace the misidentified term “Gross profit” with the correct term “Total net revenue” in the tables presenting net revenue in explanatory note “25.2. Results of the operating segments” to the Company’s audited consolidated financial statements for the years ended December 31, 2017, 2016 and 2015, on pages F-51, F-52 and F-53 of the Annual Report, as follows:
|
12/31/2017 | ||||
|
Flight transportation |
Smiles loyalty program (d) |
Combined information |
Eliminations |
Total consolidated |
Net revenue |
|
|
|
|
|
Passenger (*) |
8,785,938 |
- |
8,785,938 |
399,867 |
9,185,805 |
Cargo and other (*) |
768,566 |
- |
768,566 |
(104,350) |
664,216 |
Mileage revenue (*) |
- |
1,804,129 |
1,804,129 |
(1,078,128) |
726,001 |
Total net revenue |
9,554,504 |
1,804,129 |
11,358,633 |
(782,611) |
10,576,022 |
|
12/31/2016 | ||||
|
Flight transportation |
Smiles loyalty program |
Combined information |
Eliminations |
Total consolidated |
Net revenue |
|
|
|
|
|
Passenger (*) |
8,340,545 |
- |
8,340,545 |
330,897 |
8,671,442 |
Cargo and other (*) |
729,096 |
- |
729,096 |
426 |
729,522 |
Mileage revenue (*) |
- |
1,548,109 |
1,548,109 |
(1,081,738) |
466,371 |
Total net revenue |
9,069,641 |
1,548,109 |
10,617,750 |
(750,415) |
9,867,335 |
|
12/31/2015 | ||||
|
Flight transportation |
Smiles loyalty program |
Combined information |
Eliminations |
Total consolidated |
Net revenue |
|
|
|
|
|
Passenger (*) |
8,294,463 |
- |
8,294,463 |
288,925 |
8,583,388 |
Cargo and other (*) |
941,928 |
47,199 |
989,127 |
(19,198) |
969,929 |
Miles revenue (*) |
- |
1,172,322 |
1,172,322 |
(947,632) |
224,690 |
Total net revenue |
9,236,391 |
1,219,521 |
10,455,912 |
(677,905) |
9,778,007 |
This Amendment No. 1 comprises a cover page, this explanatory note, the amended consolidated financial statements, the exhibits referred to in paragraph (i) of this explanatory note, the signature page and the required certifications of the chief executive officer and chief financial officer of the Company.
Except as described above, this Amendment No. 1 does not amend any other information set forth in the Annual Report, and the Company has not updated disclosures included therein to reflect any events that occurred subsequent to April 30, 2018.
ITEM 19. EXHIBITS
Exhibit Number
|
|
Description
|
12.1 |
* |
Section 302 Certification of Chief Executive Officer. |
12.2 |
* |
Section 302 Certification of Chief Financial Officer. |
13.1 |
* |
Section 906 Certification of Chief Executive Officer. |
13.2 |
* |
Section 906 Certification of Chief Financial Officer. |
101.INS |
* |
XBRL Instance Document. |
101.SCH |
* |
XBRL Taxonomy Extension Schema. |
101.CAL |
* |
XBRL Taxonomy Extension Scheme Calculation Linkbase. |
101.DEF |
* |
XBRL Taxonomy Extension Scheme Definition Linkbase. |
101.LAB |
* |
XBRL Taxonomy Extension Scheme Label Linkbase. |
101.PRE |
* |
XBRL Taxonomy Extension Scheme Presentation Linkbase. |
* Filed herewith. |
Consolidated financial statements
GOL Linhas Aéreas Inteligentes S.A.
December 31, 2017, 2016 and 2015
with Reports of Independent Registered Public Accounting Firm
Gol Linhas Aéreas Inteligentes S.A.
Consolidated financial statements
December 31, 2017, 2016 and 2015
Contents
Report of Independent Registered Public Accounting Firm |
F-1 |
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting |
F-2 |
Statements of financial position |
F-3 |
Statements of operations |
F-5 |
Statements of comprehensive income (loss) |
F-6 |
Statements of changes in equity |
F-7 |
Statements of cash flows |
F-8 |
Notes to the consolidated financial statements |
F-10 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Gol Linhas Aéreas Inteligentes S.A.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Gol Linhas Aéreas Inteligentes S.A. (the Company) as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with International Financial Reporting Standards - IFRS as issued by the International Accounting Standards Board - IASB.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated April 30, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ ERNST & YOUNG
Auditores Independentes S.S.
We have served as the Company's auditor since 2014.
São Paulo, Brazil
April 30, 2018, except for Notes 13 and 25.2, which are dated May 30, 2018
F - 1
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Gol Linhas Aéreas Inteligentes S.A.
Opinion on Internal Control over Financial Reporting
We have audited Gol Linhas Aéreas Inteligentes S.A.’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Gol Linhas Aéreas Inteligentes S.A. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s consolidated statements of financial position as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2017,and the related notes and our report dated April 30, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ ERNST & YOUNG
Auditores Independentes S.S.
São Paulo, Brazil
April 30, 2018
F - 2
Gol Linhas Aéreas Inteligentes S.A. |
Consolidated statements of financial position |
As of december 31, 2017 and 2016 |
(In thousands of Brazilian Reais - R$) |
Assets |
Note |
12/31/2017 |
12/31/2016 |
Current assets |
|||
Cash and cash equivalents |
3 |
1,026,862 |
562,207 |
Short-term investments |
4 |
955,589 |
431,233 |
Trade receivables |
6 |
936,478 |
760,237 |
Inventories |
7 |
178,491 |
182,588 |
Recoverable taxes |
8.1 |
83,210 |
27,287 |
Derivatives |
27 |
40,647 |
3,817 |
Other current assets |
123,721 |
113,345 | |
Total current assets |
|
3,344,998 |
2,080,714 |
|
|
||
Noncurrent assets |
|
||
Deposits |
9 |
1,163,759 |
1,188,992 |
Restricted cash |
5 |
268,047 |
168,769 |
Recoverable taxes |
8.1 |
7,045 |
72,060 |
Deferred taxes |
8.2 |
276,514 |
107,159 |
Other noncurrent assets |
- |
4,713 | |
Investments |
12 |
1,333 |
17,222 |
Property, plant and equipment |
14 |
3,195,767 |
3,025,010 |
Intangible assets |
15 |
1,747,285 |
1,739,716 |
Total noncurrent assets |
|
6,659,750 |
6,323,641 |
|
|
||
Total assets |
|
10,004,748 |
8,404,355 |
The accompanying notes are an integral part of these consolidated financial statements.
F - 3
Gol Linhas Aéreas Inteligentes S.A. |
Consolidated statements of financial position |
As of december 31, 2017 and 2016 |
(In thousands of Brazilian Reais - R$) |
Liabilities and equity |
Note |
12/31/2017 |
12/31/2016 |
Current liabilities |
|||
Short-term debt |
16 |
1,162,872 |
835,290 |
Suppliers |
|
1,249,124 |
1,097,997 |
Suppliers - Forfaiting |
17 |
78,416 |
- |
Salaries |
|
305,454 |
283,522 |
Taxes payable |
18 |
134,951 |
146,174 |
Landing fees |
365,651 |
239,566 | |
Advance ticket sales |
19 |
1,456,939 |
1,185,945 |
Mileage program |
20 |
765,114 |
781,707 |
Advances from customers |
21,718 |
16,823 | |
Provisions |
21 |
46,561 |
66,502 |
Derivatives |
27 |
34,457 |
89,211 |
Operating leases |
26 |
28,387 |
7,233 |
Other liabilities |
100,401 |
98,772 | |
Total current liabilities |
|
5,750,045 |
4,848,742 |
|
|
|
|
Noncurrent liabilities |
|
||
Long-term debt |
16 |
5,942,795 |
5,543,930 |
Suppliers |
222,026 |
13,517 | |
Provisions |
21 |
562,628 |
723,713 |
Mileage program |
20 |
188,204 |
219,325 |
Deferred taxes |
8.2 |
188,005 |
338,020 |
Taxes payable |
18 |
66,196 |
42,803 |
Operating leases |
26 |
110,723 |
- |
Other liabilities |
43,072 |
31,056 | |
Total noncurrent liabilities |
|
7,323,649 |
6,912,364 |
|
|
|
|
Equity |
22 |
|
|
Capital stock |
3,082,802 |
3,080,110 | |
Share issuance costs |
|
(155,618) |
(155,618) |
Treasury shares |
|
(4,168) |
(13,371) |
Capital reserves |
|
88,762 |
91,399 |
Equity valuation adjustments |
|
(79,316) |
(147,229) |
Share-based payments reserve |
|
119,308 |
113,918 |
Gains on change in investment |
|
760,545 |
693,251 |
Accumulated losses |
|
(7,293,274) |
(7,312,458) |
Deficit attributable to equity holders of the parent |
|
(3,480,959) |
(3,649,998) |
|
|
|
|
Non-controlling interests from Smiles |
|
412,013 |
293,247 |
|
|
|
|
Total deficit |
|
(3,068,946) |
(3,356,751) |
|
|
|
|
Total liabilities and deficit |
|
10,004,748 |
8,404,355 |
The accompanying notes are an integral part of these consolidated financial statements.
F - 4
Gol Linhas Aéreas Inteligentes S.A. |
Consolidated statements of operations |
For the years ended of December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except basic and diluted earnings (loss) per share) |
|
Note |
12/31/2017 |
12/31/2016 |
12/31/2015 |
Net revenue |
|
|
|
|
Passenger |
|
9,185,805 |
8,671,442 |
8,583,388 |
Cargo and other |
|
1,390,217 |
1,195,893 |
1,194,619 |
Total net revenue |
23 |
10,576,022 |
9,867,335 |
9,778,007 |
|
|
|
|
|
Operating costs and expenses |
|
|
|
|
Salaries |
|
(1,708,111) |
(1,656,785) |
(1,580,531) |
Aircraft fuel |
|
(2,887,737) |
(2,695,390) |
(3,301,368) |
Aircraft rent |
|
(939,744) |
(996,945) |
(1,100,086) |
Sales and marketing |
|
(590,814) |
(555,984) |
(617,403) |
Landing fees |
|
(664,170) |
(687,366) |
(681,378) |
Aircraft, traffic and mileage servicing |
|
(874,736) |
(753,497) |
(678,075) |
Maintenance, materials and repairs |
|
(368,719) |
(593,090) |
(603,925) |
Depreciation and amortization |
|
(505,425) |
(447,668) |
(419,691) |
Passenger service expenses |
|
(437,045) |
(461,837) |
(481,765) |
Other operating expenses |
|
(610,310) |
(320,948) |
(493,621) |
Total operating costs and expenses |
|
(9,586,811) |
(9,169,510) |
(9,957,843) |
|
|
|
|
|
Equity results |
12 |
544 |
(1,280) |
(3,941) |
Income (loss) before financial result, net and income taxes |
|
989,755 |
696,545 |
(183,777) |
|
|
|
|
|
Financial results |
24 |
|
|
|
Financial income |
|
213,446 |
568,504 |
332,567 |
Financial expenses |
|
(1,050,461) |
(1,271,564) |
(1,328,891) |
Exchange rate variation, net |
|
(81,744) |
1,367,937 |
(2,266,999) |
Total financial results |
|
(918,759) |
664,877 |
(3,263,323) |
|
|
|
|
|
Income (loss) before income taxes |
|
70,996 |
1,361,422 |
(3,447,100) |
|
|
|
|
|
Income taxes |
|
|
|
|
Current |
|
(239,846) |
(257,944) |
(196,140) |
Deferred |
|
547,059 |
(1,114) |
(648,000) |
Total income taxes |
8 |
307,213 |
(259,058) |
(844,140) |
|
|
|
|
|
Net income (loss) for the year |
|
378,209 |
1,102,364 |
(4,291,240) |
|
|
|
|
|
Net income (loss) attributable to: |
|
|
|
|
Equity holders of the parent |
|
19,184 |
849,619 |
(4,460,883) |
Non-controlling interests from Smiles |
|
359,025 |
252,745 |
169,643 |
|
|
|
|
|
Basic earnings (loss) per share |
|
|
|
|
Per common share |
13 |
0.002 |
0.070 |
(0.422) |
Per preferred share |
13 |
0.055 |
2.455 |
(14.764) |
|
|
|
|
|
Diluted earnings (loss) per share |
|
|
|
|
Per common share |
13 |
0.002 |
0.070 |
(0.422) |
Per preferred share |
13 |
0.055 |
2.450 |
(14.764) |
The accompanying notes are an integral part of these consolidated financial statements.
F - 5
Gol Linhas Aéreas Inteligentes S.A. |
Consolidated statements of comprehensive income (loss) |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$) |
|
Note |
12/31/2017 |
12/31/2016 |
12/31/2015 |
|
|
|
|
|
Net income (loss) for the year |
|
378,209 |
1,102,364 |
(4,291,240) |
|
|
|
|
|
Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods |
27 |
|
|
|
Cash flow hedge |
|
67,913 |
123,889 |
(60,949) |
Tax effect |
|
- |
(92,179) |
20,723 |
Total |
|
67,913 |
31,710 |
(40,226) |
|
|
|
|
|
Total comprehensive income (loss) for the year |
|
446,122 |
1,134,074 |
(4,331,466) |
|
|
|
|
|
Comprehensive income (loss) for the year attributable to: |
|
|
|
|
Equity holders of the parent |
|
87,097 |
881,329 |
(4,501,109) |
Non-controlling interests from Smiles |
|
359,025 |
252,745 |
169,643 |
The accompanying notes are an integral part of these consolidated financial statements.
F - 6
Gol Linhas Aéreas Inteligentes S.A. |
Consolidated statements of changes in equity |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$) |
|
|
|
|
|
|
Capital reserves |
|
|
|
|
|
|
| |
|
Note |
Capital stock |
Advance for future capital increase |
Share issuance costs |
Treasury shares |
Goodwil on transfer of shares |
Special goodwill reserve of subsidiary |
Unrealized hedge gains (losses) |
Share- based payments |
Gains on change in investment |
Accumulated losses |
Total attributable to equity holders of the parent |
Smiles’ non- controlling interests |
Total |
Balances as of December 31, 2014 |
|
2,618,748 |
51 |
(150,214) |
(31,357) |
32,387 |
70,979 |
(138,713) |
93,763 |
687,163 |
(3,701,194) |
(518,387) |
185,413 |
(332,974) |
Other comprehensive income (loss), net |
|
- |
- |
- |
- |
- |
- |
(40,226) |
- |
- |
- |
(40,226) |
- |
(40,226) |
Net loss for the year |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
(4,460,883) |
(4,460,883) |
169,643 |
(4,291,240) |
Stock options exercised |
|
89 |
(51) |
- |
- |
- |
- |
- |
- |
- |
- |
38 |
3,737 |
3,775 |
Capital increase |
|
461,273 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
461,273 |
- |
461,273 |
Share issuance costs |
|
- |
- |
(5,009) |
- |
- |
- |
- |
- |
- |
- |
(5,009) |
- |
(5,009) |
Share-based payments |
|
- |
- |
- |
- |
- |
- |
- |
13,516 |
- |
- |
13,516 |
836 |
14,352 |
Gains on change in investment |
|
- |
- |
- |
- |
- |
- |
- |
- |
3,216 |
- |
3,216 |
1,215 |
4,431 |
Restricted shares transferred |
|
- |
- |
- |
8,658 |
(4,505) |
- |
- |
(4,153) |
- |
- |
- |
- |
- |
Interest attributable to shareholders’ equity |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(17,566) |
(17,566) |
Dividends declared |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(119,256) |
(119,256) |
Balances as of December 31, 2015 |
|
3,080,110 |
- |
(155,223) |
(22,699) |
27,882 |
70,979 |
(178,939) |
103,126 |
690,379 |
(8,162,077) |
(4,546,462) |
224,022 |
(4,322,440) |
Other comprehensive income, net |
|
- |
- |
- |
- |
- |
- |
31,710 |
- |
- |
- |
31,710 |
- |
31,710 |
Stock option exercised |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
3,507 |
3,507 |
Share issuance costs |
|
- |
- |
(395) |
- |
- |
- |
- |
- |
- |
- |
(395) |
- |
(395) |
Share-based payments |
|
- |
- |
- |
- |
- |
- |
- |
12,658 |
- |
- |
12,658 |
413 |
13,071 |
Gains on change in investment |
|
- |
- |
- |
- |
- |
- |
- |
- |
2,872 |
- |
2,872 |
313 |
3,185 |
Net income for the year |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
849,619 |
849,619 |
252,745 |
1,102,364 |
Restricted shares transferred |
|
- |
- |
- |
9,328 |
(7,462) |
- |
- |
(1,866) |
- |
- |
- |
- |
- |
Interest attributable to shareholders’ equity |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(10,422) |
(10,422) |
Dividends declared |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(177,331) |
(177,331) |
Balances as of December 31, 2016 |
|
3,080,110 |
- |
(155,618) |
(13,371) |
20,420 |
70,979 |
(147,229) |
113,918 |
693,251 |
(7,312,458) |
(3,649,998) |
293,247 |
(3,356,751) |
Other comprehensive income, net |
|
- |
- |
- |
- |
- |
- |
67,913 |
- |
- |
- |
67,913 |
- |
67,913 |
Stock options exercised |
|
2,692 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
2,692 |
- |
2,692 |
Capital increase from exercise of stock option in subsidiary |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
1,988 |
1,988 |
Share issuance costs |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(523) |
(523) |
Share-based payments |
11 |
- |
- |
- |
- |
- |
- |
- |
11,956 |
- |
- |
11,956 |
192 |
12,148 |
Gains on change in investment |
|
- |
- |
- |
- |
- |
- |
- |
- |
3,994 |
- |
3,994 |
- |
3,994 |
Sale of interest in subsidiary |
12 |
- |
- |
- |
- |
- |
- |
- |
- |
63,300 |
- |
63,300 |
4,865 |
68,165 |
Restricted shares transferred |
|
- |
- |
- |
9,203 |
(2,637) |
- |
- |
(6,566) |
- |
- |
- |
- |
- |
Net income for the year |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
19,184 |
19,184 |
359,025 |
378,209 |
Interest attributable to shareholders’ equity declared by Smiles |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(14,071) |
(14,071) |
Minimum dividends declared by Smiles |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(46,931) |
(46,931) |
Additional dividends distributed by Smiles |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(185,779) |
(185,779) |
Balances as of December 31, 2017 |
|
3,082,802 |
- |
(155,618) |
(4,168) |
17,783 |
70,979 |
(79,316) |
119,308 |
760,545 |
(7,293,274) |
(3,480,959) |
412,013 |
(3,068,946) |
The accompanying notes are an integral part of these consolidated financial statements.
F - 7
Gol Linhas Aéreas Inteligentes S.A. |
Statements of cash flows |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$) |
|
12/31/2017 |
12/31/2016 |
12/31/2015 |
Operating activities |
|
|
|
Net income (loss) for the year |
378,209 |
1,102,364 |
(4,291,240) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities |
|
|
|
Depreciation and amortization |
505,425 |
447,668 |
419,691 |
Allowance for doubtful accounts |
24,913 |
9,806 |
39,287 |
Provisions for legal proceedings |
158,263 |
189,244 |
44,460 |
Provisions (reversals) for inventory obsolescence |
3,059 |
- |
(414) |
Deferred taxes |
(547,059) |
1,114 |
648,000 |
Equity results |
(544) |
1,280 |
3,941 |
Share-based payments |
14,849 |
13,524 |
14,352 |
Exchange and monetary variations, net |
95,132 |
(1,149,616) |
1,723,441 |
Interest on debt and finance lease |
566,902 |
682,188 |
600,410 |
Unrealized hedge results |
8.639 |
82,990 |
18,475 |
Provision for profit sharing |
65,573 |
56,238 |
10,633 |
Write-off of property, plant and equipment and intangible assets |
145,855 |
181,308 |
25,069 |
Write-off of goodwill on investment in associate |
15,184 |
- |
- |
Losses from capital increase in associate |
- |
1,368 |
- |
Other |
- |
16,232 |
- |
Gain on redemption of debt |
- |
(286,799) |
- |
|
1,434,400 |
1,348,909 |
(743,895) |
|
|
|
|
Changes in assets and liabilities: |
|
|
|
Trade receivables |
(198,370) |
(307,574) |
(149,623) |
Short-term investments |
(353,231) |
83,062 |
309,749 |
Inventories |
1,038 |
16,648 |
(60,140) |
Deposits |
46,388 |
(323,641) |
21,077 |
Suppliers |
(202,462) |
204,184 |
210,474 |
Suppliers - Forfaiting |
76,157 |
- |
- |
Advance ticket sales |
270,994 |
(20,710) |
105,044 |
Mileage program |
(47,714) |
9,374 |
211,940 |
Advances from customers |
4,895 |
3,364 |
10,263 |
Salaries |
(43,641) |
(23,351) |
(15,438) |
Landing fees |
126,085 |
(74,090) |
(1,492) |
Taxes obligation |
460,980 |
257,464 |
233,930 |
Derivatives |
(32.310) |
(13,384) |
(6,267) |
Provisions |
(270,970) |
(253,643) |
(61,386) |
Operating leases |
131,877 |
(158,994) |
166,227 |
Other assets (liabilities) |
18,157 |
64,220 |
(67,602) |
Interest paid |
(528,398) |
(606,405) |
(548,773) |
Income taxes paid |
(221,122) |
(226,500) |
(213,555) |
Net cash flows from (used in) operating activities |
672,753 |
(21,067) |
(599,467) |
Investing activities |
|
|
|
Sale of interest in subsidiary |
68,163 |
- |
- |
Short-term investments of Smiles |
(171,174) |
(45,651) |
(254,416) |
Restricted cash |
(100,835) |
542,107 |
(403,854) |
Capital increase in associate |
- |
(3,439) |
- |
Advances for property, plant and equipment acquisition, net |
68,679 |
536,444 |
(167,646) |
Property, plant and equipment |
(370,438) |
(409,709) |
(391,731) |
Intangible assets |
(55,449) |
(29,656) |
(42,812) |
Dividends received from associate |
1,249 |
1,993 |
1,302 |
Net cash flows (used in) from investing activities |
(559,805) |
592,089 |
(1,259,157) |
F - 8
Gol Linhas Aéreas Inteligentes S.A. |
Statements of cash flows |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$) |
|
2017 |
2016 |
2015 |
Financing activities |
|
|
|
Loan funding |
1,898,738 |
- |
2,510,521 |
Debt issuance and exchange offer costs |
(65,628) |
(27,249) |
(41,990) |
Loan payments |
(274,480) |
(520,519) |
(1,632,039) |
Early payment of Senior Notes |
(707,142) |
- |
- |
Finance lease payments |
(239,092) |
(342,791) |
(409,519) |
Dividends and interest attributable to shareholders’ equity paid to non-controlling interests of Smiles |
(254,892) |
(171,829) |
(136,822) |
Capital increase |
2,692 |
- |
465,048 |
Share issuance costs |
(523) |
(395) |
(5,009) |
Net cash flows from (used in) financing activities |
359,673 |
(1,062,783) |
750,190 |
|
|
|
|
Foreign exchange variation on cash held in foreign currencies |
(7,966) |
(18,364) |
281,993 |
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
464,655 |
(510,125) |
(826,441) |
|
|
|
|
Cash and cash equivalents at beginning of the year |
562,207 |
1,072,332 |
1,898,773 |
Cash and cash equivalents at end of the year |
1,026,862 |
562,207 |
1,072,332 |
|
|
|
|
|
|
|
|
Statements of cash flows – Additional information |
|
|
|
|
|
|
|
Non-cash transactions |
|
|
|
Interest on shareholders’ equity and dividends, net of taxes |
(49,602) |
- |
- |
Deposits in guarantee for lease agreements |
10,307 |
- |
- |
Write-off of finance lease agreements |
(15,334) |
- |
- |
Renegotiation of finance lease agreements |
- |
549,144 |
145,487 |
Provision for aircraft return |
- |
97,423 |
259,673 |
Software acquisition |
- |
25,660 |
- |
Engine maintenance financing |
529,775 |
201,170 |
- |
Property, plant and equipment acquisition through Finimp |
63,066 |
- |
107,592 |
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F - 9
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
Gol Linhas Aéreas Inteligentes S.A. (the “Company” or “GLAI”) is a publicly-listed company incorporated on March 12, 2004, under the Brazilian Corporate Law. The Company is a holding company of the following main subsidiaries: (i) Gol Linhas Aéreas S.A. (“GLA”, formerly “VRG Linhas Aéreas S.A.”), which is mainly engaged in (a) the regular and non-regular flight transportation services of passengers, cargo and mailbags, domestically or internationally, according to the concessions granted by the regulator; and (b) other activities in relation to flight transport services provided in its by-laws; and (ii) Smiles Fidelidade S.A. (“Smiles Fidelidade”, formerly Webjet Participações S.A. prior to the change in the corporate name on July 1, 2017), which mainly operates (a) the development and management of its own or third party’s customer loyalty program, and (b) sale of redemption rights of awards related to the loyalty program.
Additionally, the Company is the direct parent company of the wholly-owned subsidiaries GAC Inc. (“GAC”), Gol Finance Inc., Gol Finance, formerly Gol LuxCo S.A. (“Gol Finance”), Gol Dominicana Lineas Aereas SAS (“Gol Dominicana”), and indirect parent company of Smiles Viagens e Turismo S.A. (“Smiles Viagens”).
The Company’s corporate address is located at Praça Comandante Linneu Gomes, s/n, concierge 3, building 24, Jardim Aeroporto, São Paulo, Brazil.
The Company’s shares are traded on the B3 S.A. - Brasil, Bolsa, Balcão (“B3”) and on the New York Stock Exchange (“NYSE”). The Company adopted Level 2 Differentiated Corporate Governance Practices from the B3 and is included in the Special Corporate Governance Stock Index (“IGC”) and the Special Tag Along Stock Index (“ITAG”), which were created for companies committed to apply differentiated corporate governance practices.
GLA is highly sensitive to the economy and also to the U.S. dollar, as approximately 50% of its costs are denominated in U.S. dollar. To overcome the challenges faced throughout 2016, the Company implemented a plan to improve its liquidity and its operating margin. As a result, the Company has been improving its liquidity and ability to respond effectively to the adverse events caused by the instability of the Brazilian economic scenario. The diligent work performed to adjust the fleet size to the economy growth and match seat supply to demand are some of the ongoing initiatives implemented to maintain a high load factor. The Company will continue to maintain a solid strategy of liquidity initiatives, such as the adjustment of the route network, initiatives to reduce costs and the adjustment of its capital structure.
Moving forward with its liquidity plan, at the end of December 2017, the Company implemented several initiatives to restructure its debt, reducing the financial cost of its debt. The offering of Senior Notes on December 11, 2017 raised US$500 million, at lower rates, was partially used to amortize the Company’s most onerous debt and will significantly reduce the financial cost as from 2018. Other initiatives are scheduled for 2018, reinforcing the Company’s commitment to reducing the financial cost in order to promote and solidify its liquidity strategy.
Even in a scenario with an outlook for improvement, the Company is subject to uncertainties in the Brazilian economy and political scenario that may directly impact the effectiveness of the expected results.
Management understands that the business plan prepared, presented and approved by the Board of Directors on January 11, 2018, shows strong elements to continue as going concern.
On July 1, 2017, due to change in the organizational structure, and to generate tax savings from the use of tax losses carryforward, the Company approved a corporate restructuring through the merger of Smiles S.A. and Smiles Fidelidade S.A.. As a result of the merger, Smiles S.A. was dissolved and all its assets, rights and obligations were transferred to Smiles Fidelidade S.A., pursuant to articles 224, 225, 227 and 264 of the Brazilian Corporate Law.
Irregular Payments Investigation
In 2016, the Company received inquiries from Brazilian tax authorities regarding certain payments to firms that turned out to be owned by politically exposed persons in Brazil. Following an internal investigation, the Company engaged U.S. and Brazilian legal counsel to conduct an external independent investigation to ascertain the facts with regard to these and any other payments identified as irregular
F - 10
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
and to evaluate the adequacy and effectiveness of the Company’s internal control and compliance programs in light of the findings of the investigation.
In December 2016, the Company entered into a leniency agreement with the Brazilian Federal Public Ministry (the “Leniency Agreement”), under which the Company agreed to pay R$12.0 million in fines and to make improvements to its compliance program. In turn, the Federal Public Ministry agreed not to bring any criminal or civil suits related to activities that are the subject of the Leniency Agreement and that may be characterized as (i) acts of administrative impropriety and related acts involving politically exposed persons or (ii) other possible actions, which at the date of the Leniency Agreement had not been identified by the ongoing investigation (any such actions possibly resulting in an increase in the fines under the Leniency Agreement). In addition, the Company paid R$4.2 million in fines to the Brazilian tax authorities related to the above-mentioned payments. The Company voluntarily informed the U.S. Department of Justice, the SEC and the CVM of the external independent investigation and the Leniency Agreement.
The external independent investigation was concluded in April 2017. It revealed that certain additional irregular payments were made to politically exposed persons. None of the amounts paid were material (individually or in the aggregate) in terms of cash flow, and none of our current employees, representatives or members of the board or Management knew of any illegal purpose behind any of the identified transactions or knew of any illicit benefit to the Company arising out of the transactions investigated. The Company reported the conclusions of the investigation to the relevant authorities and will maintain them informed of any developments, as well as collaborate with them in their analysis. These authorities may impose fines and possibly other sanctions on the Company.
The Company continue to take steps to strengthen and expand its internal control and compliance programs. Among other measures, the Company are monitoring its transactions with politically exposed persons, and enhanced its procurement procedures, including the contracting and execution of services by outside providers. The Company have hired specialists to assess risks and review internal controls related to fraud and corruption to identify and help us implement further improvements, and the Company will continue to hire specialists to implement any necessary improvements, as well as systems to monitor its transactions and train its employees.
2. Approval and summary of significant accounting policies applied in preparing the financial statements
The consolidated financial statements were amended in relation to those issued on April 30, 2018 to present additional information (i) on Note 13 to present the total net income (loss) for the year attributable to equity holders of the parent and additional disclosure to clarify that the Company’s preferred shares carry economic rights, including dividend rights, 35 times those of common shares; and (ii) to replace the misidentified term “gross profit” to “total net revenue” in the tables presenting net revenue by segment in Note 25.2.
The Company’s consolidated financial statements were authorized for issue by Management on May 30, 2018.
The consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
These financial statements were prepared based on historical cost, except for certain financial assets and liabilities that are measured at fair value and investments measured using the equity method.
The Company's consolidated financial statements as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015 were prepared based on the going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business.
Except for Gol Dominicana, which functional currency is U.S. dollar, the Company and its subsidiaries functional currency is the Brazilian Real. The presentation currency of these consolidated financial statements is the Brazilian Real.
Certain comparative amounts were reclassified to conform to the current year presentation.
F - 11
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
Basis of consolidation
The consolidated financial statements comprise Gol Linhas Aéreas Inteligentes S.A., its subsidiaries, jointly controlled and associate, as follows:
Entity |
Date of constitution |
Location |
Operational activity |
Type of control |
% equity interest | |
12/31/2017 |
12/31/2016 | |||||
Extensions: |
|
|
|
|
|
|
GAC |
03/23/2006 |
Cayman Islands |
Aircraft acquisition |
Direct |
100.0 |
100.0 |
Gol Finance Inc. |
03/16/2006 |
Cayman Islands |
Financial funding |
Direct |
100.0 |
100.0 |
Gol Finance |
06/21/2013 |
Luxembourg |
Financial funding |
Direct |
100.0 |
100.0 |
Subsidiaries: |
|
|
|
|
|
|
GLA |
04/09/2007 |
Brazil |
Flight transportation |
Direct |
100.0 |
100.0 |
Smiles Fidelidade |
08/01/2011 |
Brazil |
Loyalty program |
Direct |
52.7 |
53.8 |
Smiles Viagens (*) |
08/10/2017 |
Brazil |
Travel agency |
Indirect |
100.0 |
- |
Gol Dominicana |
02/28/2013 |
Dominican Republic |
Non-operational |
Direct |
100.0 |
100.0 |
Jointly controlled: |
|
|
|
|
| |
SCP Trip |
04/27/2012 |
Brazil |
Flight magazine |
Indirect |
60.0 |
60.0 |
Associate: |
|
|
|
|
|
|
Netpoints |
11/08/2013 |
Brazil |
Loyalty program |
Indirect |
25.4 |
25.4 |
(*) The entity is a start up.
The accounting policies were applied consistently in all the consolidated entities and are consistent with those used in previous years. All the transactions, balances, income and expenses between the consolidated entities are fully eliminated in the consolidated financial statements.
The summary of significant accounting policies adopted by the Company is as follows:
a) Cash and cash equivalents
Cash and cash equivalents include bank deposits and short-term investments with maturities of three months or less (or with no restriction period for redemption) which have high liquidity and are readily convertible into a known amount of cash and have an insignificant risk of change in value.
b) Short-term investments
Short-term investments are represented by financial investments with first-tier financial institutions and include exclusive investment funds.
c) Restricted cash
Restrict cash comprises mainly deposits in guarantee and linked to securities, and short and long term debt.
F - 12
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
d) Trade receivables
Trade receivables are measured based on cost, less allowances for doubtful accounts, which approximate their fair value, due to their short-term nature. An allowance for doubtful accounts is recorded when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivable through risk analysis and taking into account the historical analysis of the recovery of arrears. The allowance for doubtful receivables is the difference between the original book value and amount considered recoverable. Provision is made for all accounts overdue for more than 90 days for installment sales, travel and cargo agencies, and 180 days in respect of airline partners. Additionally, in some cases, the Company performs an individual analysis of overdue balances.
e) Inventories
Inventories are comprised primarily of maintenance and spare parts and materials, and are stated at the lower of cost and net realizable value. The cost of inventories is determined using the average cost method and includes expenses incurred in their acquisition and transportation to their current location. The provision for inventory obsolescence is recorded when losses are probable.
f) Financial assets and liabilities
Financial assets
After initial recognition, these are measured in each balance sheet with the pre¬defined classification, based on the purposes for which they were acquired or issued, as described below:
i. |
Loans and receivables: with fixed or determinable payments that are not quoted in an active market which are measured at amortized cost after initial recognition under the effective interest method. Interest, inflation adjustment, foreign exchange changes, less impairment losses, when applicable, are recognized in profit or loss under financial income or financial expenses, when earned or incurred. The Company has mainly bank deposits and trade receivables classified under this category.
|
ii. |
Financial assets at fair value through profit or loss: include financial assets held for trading (i.e., acquired primarily for the purpose of sale in the short term) and financial assets designated upon initial recognition at fair value through profit or loss. Interest, inflation adjustment, foreign exchange changes and changes arising from the adjustment to fair value are recognized in profit or loss under financial income or financial expenses, when earned or incurred. The Company has cash equivalents, short-term investments and restricted cash classified under this category. |
Financial liabilities
i. |
Financial liabilities at fair value through profit or loss: include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through profit or loss, except those designated as hedge instruments. They are remeasured at fair value at every balance sheet date. Interest, inflation adjustment, foreign exchange changes and changes arising from measurement at fair value, when applicable, are recognized in the profit or loss when incurred. The Company classifies under this category derivatives not designated as hedging instruments.
|
ii. |
Loans and borrowings: financial liabilities that are not regularly traded before maturity. After initial recognition, they are remeasured at amortized cost using the effective interest method. Interest, inflation adjustment and foreign exchange changes, if applicable, are recognized in profit or loss when incurred. The Company recognized under this category current and noncurrent short and long term debt (including finance leases) and trade accounts payable. |
F - 13
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
Derivatives: Changes on aircraft fuel, interest rate and foreign expose the Company and its subsidiaries to risks that may affect its financial performance. In order to mitigate these risks, the Company uses financial instruments that may or may not be designated as hedge accounting, and, if designated, are classified as cash flow hedges or fair value hedges.
· Not designated as hedge accounting: the Company may use derivative financial instruments as not designated as hedge accounting when the objectives of the risk Management do not require such classification. The non¬designated operations have movements in fair value directly recognized in financial results.
· Designated as cash flow hedge: hedge the income or expenses from the fluctuations on exchange rates. The effectiveness is based on statistical correlation methods and the ratio between gains and losses on the financial instruments used as hedge, and the cost and expense fluctuation of the hedged items. The instruments are considered as effective when the fluctuation in the value of derivatives offsets between 80% and 125% the impact of the price fluctuation on the cost or expense of the hedged item. The balance of the actual fluctuations in the fair values of the derivatives are classified in equity (under “Other comprehensive income (loss”) and the ineffective gains or losses are recognized in profit or loss (under “Financial results”), until the revenue recognition or hedged expense under the same item of profit or loss in which the item is recognized.
Derecognition: the Company writes off a financial asset only when the contractual rights to the cash flows from the asset expire, or transfers the asset and substantially all the risks and benefits of ownership to a third party. If the Company does not transfer nor retains substantially all the risks and benefits of ownership of the financial asset, but continues to control the transferred asset, the Company recognizes the participation retained and its liabilities on the values that it will have to pay. If the Company retains substantially all the risks and benefits of ownership of the financial asset transferred, the Company continues recognizing this asset. A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in profit or loss.
Hedge accounting is discontinued prospectively when the Company (i) cancel the hedge operation (ii) the derivative matures or is sold, terminated, or exercised, or (iii) when no longer qualifies as hedge accounting. If the operation is discontinued, any gains or losses previously registered and accumulated in equity in “Other comprehensive income (loss)” until that date are registered on statement of operations as the operation is registered. When the Company expects that the hedge operation will no longer occur, the accumulated and deferred gains or losses in equity are immediately recorded in profit or loss, under the same line that it was initially recorded.
Offsetting of financial instruments: financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
g) Deposits
Aircraft and engine maintenance deposits: refer to payments made in U.S. dollars by the Company to commercial lease companies to be used in future aircraft and engine maintenance work. The realization of these assets occurs substantially by utilization of the deposits to pay the maintenance services and the receipts of funds, according to the negotiations with the lessors. The exchange rate variations arising from payments, net of uses for maintenance, are recognized as an expense or revenue in the financial results. Management performs regular reviews of the recovery of maintenance deposits based on future maintenance events, and believes that the amounts recorded in the consolidated financial position are recoverable.
F - 14
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
Certain lease agreements establish that if a maintenance event does not occur, the deposits are not refundable. Any excess amounts retained by the lessor upon termination of the lease agreement are recognized in profit or loss, under “maintenance, materials and repairs”.
Additionally, the Company maintains agreements with some lessors under which the deposits have been replaced by letters of credit, which can be executed by the lessor if the aircraft maintenance is not performed as scheduled. Many of the aircraft lease agreements do not require maintenance deposits and are guaranteed with letters of credit. As of December 31, 2017, no letter of credit has been executed.
Deposits in guarantee and collaterals for lease agreements: the deposits in guarantee and collaterals are denominated in U.S. dollars, and are adjusted on a monthly basis for foreign exchange fluctuations, they do not bear interest and are reimbursable to the Company upon termination of the agreements.
h) Leases and sale-leaseback transactions
In accordance with IAS 17 "Leases", leases are classified as finance leases when the lease arrangement transfers substantially all the risks and rewards of ownership to the lessee, or meet the following conditions:
i. the lease transfers ownership of the asset to the lessee at the end of the lease agreement;
ii. the lessee has the option to purchase the asset at a price that is expected to be sufficiently lower than fair value at the date the option becomes exercisable such that, at the inception of the lease, is reasonably certain that the option will be exercised;
iii. the lease term is the most part of the economic asset life, even if the title is not transferred;
iv. at the beginning of the lease, the present value of minimum lease payments represents substantially all the fair value of the leased asset;
v. the leased assets are of such a specialized nature such that only the lessee can use them without major modifications.
The difference between the present value and the total amount of falling due installments is charged to profit or loss as financial expenses. The corresponding obligation to the lessor is accounted for as short and long term debt. The aircraft held under finance leases, which have a purchase option at the end of the contract, are depreciated on a straight¬line basis over the useful life at rates calculated to write down the cost to the estimated residual value of 20% based on market price valuations. All other aircraft recorded in property, plant and equipment, when there is no reasonable certainty that the Company will obtain ownership of the property at the end of the contractual term, are depreciated over the shorter of the useful life of the assets and the lease agreement. The other leases are classified as operating leases and are recognized as an expense in profit or loss on a straight¬line basis over the term of the lease agreement.
Lease payments under operating leases are recognized as an expense on a straight-line basis over the lease term in “Aircraft leases”. Future payments are not recognized in the financial statements but are future commitments undertaken are presented on Note 26.
Gains or losses related to sale-leaseback transactions classified as an operating lease after the rights sale are accounted as follows:
· Immediately recorded in profit or loss when it is clear that the transaction is established at fair value;
· If the sale price is below fair value, any profit or loss is immediately recognized as other (expense) income, however if the loss is compensated by future lease payments at below or above market price (the gains or losses are deferred and amortized in proportion to the lease payments during the period that the assets will be used);
· In the event of the sale price being higher than the fair value of the asset, the value exceeding the fair value is deferred and amortized during the period when the asset is expected to be used. The amortization of the gain is recorded as a reduction in lease expenses.
F - 15
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
The amount of deferred losses is recorded as other current or noncurrent assets, and the amount of deferred gains is recorded as other liabilities. The breakdown between short and long-term is based on the lease terms.
If the sale-leaseback transactions results in finance lease, any excess proceeds over the carrying amount shall be deferred and amortized over the lease term. The Company did not enter into any sale-leaseback transaction that resulted in a finance lease during the years ended December 31, 2017, 2016 and 2015.
i) Property, plant and equipment
Property, plant and equipment, including rotable parts, are recorded at acquisition or construction costs, including interest and other financial charges. Each component of property, plant and equipment that has a cost that is significant in relation to the overall cost of the item is depreciated separately. The estimated useful life for property and equipment, for depreciation purposes, is disclosed in Note 14.
The estimated market value at the end of its useful life is a premise for measuring the residual value of the Company’s property, plant and equipment. Except for aircraft with purchase option at the end of the agreements, the other items have no residual value. The residual value and the useful life of assets are reviewed annually and adjusted, if necessary.
The carrying amount of the property, plant and equipment is analyzed in order to verify possible impairment losses when events or changes in circumstances indicate that the book amount is higher than the estimated recoverable amount.
A write-off of a property, plant and equipment item occurs after disposal or when there is no future economic benefits resulting from continued use of the asset. Any gains or losses on property, plant and equipment sales or write-offs are determined by the difference between the values received in the sale and the asset's book value, and are recognized in the statement of operations.
Additionally, the Company adopts the following treatment for the items below:
Advances for aircraft acquisition: refer to prepayments made based on the agreements entered into with Boeing for the purchase of Boeing 737-800 Next Generation and 737- MAX aircraft. The advances are recorded by historical exchange rate at the conversion date.
Lease agreements: assets held through finance leases, when the risks and rewards are transferred to the Company, the asset is registered on the balance sheet. At the beginning of the lease agreement, the Company registers the finance lease as asset and the liability at fair value, or, if lower, the present value of the minimum lease payments.
The leased asset is depreciated over the useful life of the asset. However, when it is uncertain that ownership will be transferred to the Company at the end of the lease agreement, the asset is depreciated over its expected useful life or the contractual lease term period, which ever is shorter.
Other engine and aircraft leases are classified as operating leases and lease expense on a straight-line basis on the statement of operations.
Aircraft and engine redelivery expenses: the Company records a provision for future costs to be incurred upon the aircraft return. Such provision is determined based on the the estimated costs to be incurred upon redelivery and the contractual requirements of operating lease agreements as described in Note 14. After initial recognition, the corresponding asset is depreciated on a straight line basis over the terms of the contract.
Capitalization of major engine, aircraft and APU (Auxiliary Power Unit) maintenance expenses: costs on major maintenance (including replacement and labor parts) are capitalized only when there is an extension of the estimated useful life of the aircraft or the engine. Such costs are capitalized and depreciated until the next major maintenance. Incurred costs that do not extend the useful life of the aircraft, the engine or APU’s, or related to other components of the aircraft are recognized directly in profit or loss.
F - 16
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
j) Intangible assets
Intangible assets are non-monetary assets without physical properties, which carrying amount of intangible assets with indefinite life is tested for impairment annually or when strong evidence of changes in circumstances indicates that the carrying amount may not be recoverable.
Goodwill: goodwill is annually tested for impairment by comparing the carrying amount of the cash-generating units (GLA and Smiles Fidelidade) with its recoverable amount. Management exercises considerable judgment to assess the impact of operating and macroeconomic changes in order to estimate the future cash flows and measure the recoverable amount of that asset.
Airport operating rights: airport operating rights were acquired as part of the acquisition of GLA and of Webjet (formerly named Webjet Linhas Aéreas S.A.), and were recognized at fair value at the acquisition date and are not amortized. Those rights are considered to have an indefinite useful life due to several factors and considerations, including requirements and necessary permits to operate within Brazil and limited slot availability in the most important airports in terms of traffic volume. The carrying value of these rights is evaluated annually as to its recoverable amount or in case of changes in circumstances indicates that carrying values may not be recoverable. No impairment has been recorded until as of the balance sheet date.
Software: The costs related to the acquisition or development of computer software that is separable from an item of related hardware is capitalized separately and amortized over a period on a straight-line basis in accordance with the software agreement.
k) Income taxes
The income tax and social contribution expenses are represented by the sum of current and deferred income taxes.
Current income taxes: the provision for income tax and social contribution is based on the taxable income. The provisions for income and social contribution taxes are calculated for each company on a stand alone basis using statutory rates in effect at the end of the year.
Deferred income taxes: deferred income taxes are recognized on temporary differences and net operating losses carryforward at the end of the reporting date between the balances of assets and liabilities recorded in the financial statements and their tax basis used in calculation of taxable income.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that is not probable that sufficient taxable income will be incurred to allow all or part of the deferred tax asset to be realized.
Deferred tax related to items recognized directly in equity is also recognized in equity. Deferred tax items are recognized in accordance with the transaction that gave rise to the deferred tax, in other comprehensive income (loss) or directly in equity. Deferred tax assets are recognized only if they are expected to be realized.
Net operating losses carryforward are recorded based on the expected future taxable income for each company, in accordance with legal limitations.
The calculation of the expected future taxable income is based on the business plan, and are annually reviewed and approved by the Company’s Board of Directors.
l) Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation.
F - 17
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
Provision for aircraft return: for aircraft operating leases, the Company is contractually required to return the equipment in a predefined level of operational capability. In these cases, the Company accrues the cost of returning, since these are present obligations arising from past events that will generate future disbursements, whose measurement is made with reasonable assurance. These costs are primarily related to expenses of aircraft reconfiguration (interior and exterior), obtaining licenses and certifications techniques, painting, etc. according to return agreement clauses. The estimated cost is initially recorded at present value and the consideration of the provision for aircraft return is made under "Aircraft reconfigurations/overhauling" of property, plant and equipment (see Note 14). After initial recognition, the asset is depreciated on a straight-line basis and liabilities updated according to the discount rate estimated by the Company with the result shown in financial result. Any changes in the estimated costs to be incurred are recorded prospectively.
Provision for engine return: the provision is estimated based on the minimum contractual conditions that the equipment must have when returned to the lessor, considering the historical costs incurred and the conditions of the equipment at the time of evaluation. These provisions are recorded in profit or loss from the time that the minimum contract requirements are reached and the next maintenance is scheduled for a date later than the date set for the return of the engine. The Company estimated the provision for engine return in accordance with the expenditure that is intended be incurred, and, when the effect of the money value over time is considerate relevant, the provision amount will be the present value of the expenses that are expected to settle the obligation. The agreement maturity will be based on the date that the return of aircraft leased is expected, i.e., or the lease term.
Provision for legal proceedings: Provisions are recorded for all the lawsuits that represent probable loss according to its individual assessment, considering the estimated financial outflow. If the Company expects that some or all of the provision to be reimbursed, the reimbursement is recorded as a separate asset. The expense related to any provision is presented in the statement of operations, net of any reimbursement.
m) Revenue recognition
The passenger revenue is recognized when air transportation services are actually provided to the passenger. Tickets sold but not yet used are recognized as advance ticket sales and correspond to deferred revenue from tickets sold to be transported in a future date, net of tickets that will expire in accordance with the Company’s expectations (breakage). Breakage consists of the statistical calculation, on a historical basis, of unused, expired tickets, i.e., passengers to be transported that have a high probability of not flying. The Company periodically records adjusted deferred revenues based on tickets which have actually expired.
Revenues from cargo shipment are recognized when transportation is provided. Other revenues include charter services, onboard sales services, tickets exchange rates, and other additional services, and are recognized when the service is provided.
n) Deferred revenue
The "Smiles Loyalty Program" is designed to retain its customers through the grant of mile credits to its participants. The obligation created by the issuance of miles is measured based on the price that the miles were sold to its airline and non-airline partners, classified by the Company as the fair value of the transaction. The revenue recognition occurs when the miles are redeemed by the Smiles Program participants to exchange the rewards with its partners.
In the consolidated financial statements, the revenue due to exchange of miles from the program and the flight tickets sales is only recognized when the flight transportation is provided.
o) Share-based payments
Stock options: the fair value of stock options granted to executives is estimated at the grant date using the Black-Scholes pricing model and the expense is recognized in profit or loss during the period that the right is acquired (vesting period), based on estimates which granted shares will be acquired, with a corresponding entry in equity.
F - 18
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
Restricted shares: the transfer of restricted shares to its beneficiaries is made at the end of three years from the grant date, provided that the recipient has maintained its employment during that period. This transfer takes place through treasury shares, whose value per share is determined by the market price on the date of transfer to the beneficiary. Gains related to differences in the fair value of the share at the grant date and the value on the date of transfer of restricted shares are recorded in equity in capital reserves under "Goodwill on transfer of shares".
The impact of the review of the amounts of the restricted shares or shares to be acquired in comparison with the original estimates, if any, is recognized in profit or loss, such as the cumulative expense reflects the revised estimate, with a corresponding adjustment in equity.
p) Segment information
The Company has two reportable segments, as described below:
Flight transportation: the operations are derived from GLA and consist of air transportation services and the major assets that contribute to the generation of revenues are its aircraft. Other revenues primarily arise from cargo, excess baggage charges and cancellation fares, all directly attributable to flight transportation services.
Smiles loyalty program: the operations in this segment are represented by miles sales transactions to airline and non-airline partners. Under this context, the program management, marketing and rights of redemption of prizes and creating and managing the database of individuals and corporations.
q) Foreign currency transactions
Transactions in foreign currencies are recorded at the exchange rate prevailing at the time that the transaction occurs. Monetary assets and liabilities denominated in foreign currencies are subsequently calculated based on the conversion using the exchange rate at the balance sheet date and differences resulting from the currency calculated based on conversion are recognized in profit or loss in financial results under “Exchange rate variation, net”.
r) Main accounting estimates and assumptions adopted
The process of preparing these financial statements often requires that Management adopts assumptions, judgments and estimates that may affect the application of the policies and amounts of assets and liabilities, revenues and expenses. The actual results may differ from the adopted estimates, since such use historical experience and some assumptions that are believed to be appropriate under the circumstances. The reviews of accounting estimates are recognized in the same period in which the assumptions are reviewed and the effects are recognized on a prospective basis.
The estimates and assumptions that have a significant risk of material adjustments on the amounts of assets and liabilities are discussed below:
Impairment of financial assets: the Company estimates any impairment losses at every balance sheet date, or when there are evidences that the carrying amounts may not be recoverable. Problems in repatriation or usage of financial assets in other countries are indicative for impairment tests.
Impairment of non-financial assets: the Company assesses if there are indications of impairment for all non-financial assets at the balance sheet date, or when there is evidence that the carrying amount may not be recoverable. The recoverable values of the cash-generating unit were determined using its value-in-use. The value-in-use is determined based on the assumption of discounted cash flows.
Income taxes: The Company believes that the tax positions taken are reasonable. However, it recognizes that the authorities may question the positions taken which may result in additional liabilities for taxes and interest. The Company recognizes provisions that involve considerable judgment of the management. The provisions are reviewed and adjusted to account for changes in circumstances, such as lapsing of applicable statutes of limitations, conclusions of tax authorities, additional exposures based on identification of new issues or
F - 19
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
court decisions affecting a particular tax issue. Actual results can differ from estimates.
Breakage: As part of the process of revenue recognition, flight tickets issued that will not be used and miles issued that will not be redeemed are estimated and recognized as revenue at the moment of the sale and issuance, respectively. These estimates, referred to as breakage, are reviewed annually and are based on historical data of expired flight tickets and expired miles.
Allowance for doubtful accounts: the allowance for doubtful accounts is recorded in the amount considered sufficient by the management in order to cover possible losses on trade receivables arising from receivables, considering the risks involved. The Company periodically evaluates its receivables and, based on historical data, combined with risk analysis per customer, registers the allowance for losses.
Provision for legal proceedings: provisions are recorded for all lawsuits that represent probable losses, according to the loss probability, which includes the assessment of available evidence, including the legal consultants’ opinion, internal and external, the proceedings nature and past experiences. Additionally, the provisions are periodically reviewed and the management believes that the provisions recorded are sufficient, based on the probability of loss. However, significant changes in judicial decisions can have significant impacts on the Company’s financial statements.
Provision for aircraft return: the Company estimates the provision for aircraft returns considering the costs in accordance with returns conditions agreements as set out in the return conditions in the lease agreements.
Provision for engine return: the Company records the provision for engine return based on an estimate of the agreement obligation of each engine return and recorded in the statement of operations only in the period between the last maintenance and the date of return of the components.
Fair value measurement of financial instruments: when the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques, including the discounted cash flow model. The inputs to these models are based on observable markets, when possible; however, when this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect the reported fair value of financial instruments.
a) Standards issued but not yet effective:
IFRS 9 – Financial Instruments
In July 2014, the IASB issued the final version of IFRS 9 – “Financial Instruments”, that replaces IAS 39 – “Financial Instruments: Recognition and Measurement” and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing fully comparative information is not compulsory. The adoption of IFRS 9 will not affect the classification and measurement of the Company’s financial assets. One of the main impacts is the measurement of the allowance for doubtful accounts, which will be calculated based on expected credit losses instead of estimated losses. The Company expects a reduction of approximately 30% in estimated losses. Related to the effects on derivatives, the Company expects that the main changes from adoption of IFRS 9 will be related to the documentation of hedging strategy policies.
F - 20
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
IFRS 15 – Revenue from Contracts with Customers
IFRS15 - Revenue from Contracts with Customers was issued in May 2014 and amended in April 2016, and is effective for fiscal years beginning on or after January 1, 2018. IFRS15 presents revenue recognition principles based on a five-step model to be applied to all contracts with customers, in accordance with the entity’s performance requirements. The Company will adopt the new standard on the date it becomes effective, as of January 1, 2018, using the full retrospective method. In 2017, the Company carried out an assessment of IFRS 15, which is subject to changes due to more detailed analyses that are still in progress. Among the main challenges for the adoption of IFRS 15, the Company believes that the recognition of the following revenues may change compared with the current accounting:
F - 21
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
a) Passenger revenue arising from codeshare agreements: corresponds to agreements where two or more airlines get into an agreement to provide air transportation services. In transactions when the Company will act as principal, revenue will be recognized based on the gross value of the transaction (price of the ticket to the final customer), and in transactions when the Company will act as agent, revenue will be recognized based on the net value of the transaction (sale price less the amount payable to the other airline). The Company did not identify any impact of the change to this standard on revenue arising from codeshare agreements.
b) Ancillary revenue: comprises all revenue related to air transportation services, such as excess baggage, cancelation fees and refunds, as cancellations, no-show, among others. These revenues were assessed and will be classified as “related to the main service”, and will be recognized only when the air transportation service is incurred. In this regard, the Company concluded its assessment and estimated impacts of approximately R$14 million as a result of changes to the timing of recognition of revenues and approximately R$500 million from the reclassification of revenues from “Other revenue” to “Passenger revenue”.
c) Breakage revenue: comprises the expectation of mileage and tickets that are not likely to be used by the customer. To recognize these revenues, the Company uses analysis tools and statistical data that allow the estimate to be calculated with a reasonable level of certainty. Given the standard’s specific requirements regarding this, the Company concluded that its methodologies are in compliance with IFRS 15.
d) Mileage program: Presentation as agent: the main impact refers to the presentation of gross revenue with redemption of premiums net of their respective costs. Mileage valuation: there are no impacts resulting from the mileage valuation, since they are priced based on the sales value, considering that the Smiles Mileage Program operates independently. As a consequence, there is no change in the valuation of the tickets that are originated from the redemption of the mileage program.
IFRS 16 – Leases
IFRS 16 was issued in January 2016, and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Lease-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets the principles for recognition, measurement, presentation and disclosure of leases and require lessess to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. IFRS 16 is effective for annual periods beginning on or after January 1, 2019. IFRS 16 requires that, for the majority of leases, the lessor records an asset related to the right of use of the leased item, and a liability related to the lease. The Company has 88 aircraft leased as operational leases of the total of 119 aircraft, and the adoption of this standard will have a material impact on the Company, with the potential increase in the assets corresponding to the right of use of the leased item and liabilities related to the leases, which will be recorded in the statements of financial position as from the adoption date.
IFRIC 22 – Foreign Currency Transactions and Advance Consideration
IFRIC 22 clarifies that in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a nonmonetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or nonmonetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the transaction date for each payment or receipt of advance consideration. IFRIC 22 is effective for annual periods beginning on or after January 1, 2018, and intended to eliminate diversity in practice, when recognising the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or nonmonetary liability relating to advance consideration received or paid in a foreign currency. The Company does not expect this interpretation to have significant impacts, as transactions with these characteristics already comply with this interpretation.
IFRIC 23 – Uncertainty over Income Tax Treatment
IFRIC 23 addresses the accounting for income taxes when tax treatments involve uncertainty that
F - 22
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
affects the application of IAS 12 and does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. IFRIC 23 is effective for annual periods beginning on or after January 1, 2019, and the Company does not expect significant impacts from the adoption of this interpretation.
IFRS 2 – Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2
The IASB iassued amendments to IFRS 2 – Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of an share-based payment transaction changes its classification from cash settled to equity settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permited if elected for all three amendments and the other criteria are met. The amendments are effective for annual periods beginning on January 1, 2018, and early application is permitted. The Company does not expect significant impacts from the adoption of these amendments on its consolidated financial statements.
b) Annual improvements – Applicable to annual periods beginning on or after January 1, 2017:
Amendments to IFRS 12 – Disclosure of Interests in other Entities: Clarification of the scope of disclosure requirements in IFRS 12
The amendments clarify that the disclosure requirements in IFRS 12 apply to an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale. These amendments did not affect the Company’s consolidated financial statements.
Amendments to IAS 12 – Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses
The amendments clarify on the recognition requirements of deferred tax assets for unrealized losses and the method to assess the existence of probable future taxable income against which the deductible temporary differences can be utilized. These amendments did not affect the Company’s consolidated financial statements.
Amendments to IAS 7 – Statement of Cash Flows: Disclosure Initiative
The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The Company has provided the information for both the current and the comparative periods in Note 28.
There are no other standards and interpretations issued but not yet adopted that, in Management's opinion, have a significant impact on the Company’s results or equity.
F - 23
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
|
12/31/2017 |
12/31/2016 |
Cash and bank deposits |
427,608 |
246,528 |
Cash equivalents |
599,254 |
315,679 |
Total |
1,026,862 |
562,207 |
The breakdown of cash equivalents is as follows:
|
12/31/2017 |
12/31/2016 |
Private bonds |
164,959 |
45,882 |
Government bonds |
14,039 |
- |
Investment funds |
420,256 |
269,797 |
Total |
599,254 |
315,679 |
As of December 31, 2017, the private bonds were comprised by buy-back transactions and Bank Deposit Certificates - “CDBs”, remunerated at a weighted average rate equivalent to 77.6% (52.2% as of December 31, 2016) of the Interbank Deposit Certificate rate (“CDI”).
Government bonds were primarily represented by LFT, emunerated at a weighted average rate of 116.3% of the CDI rate.
The investment funds classified as cash equivalents have high liquidity and, according to the Company’s assessment, are readily convertible to a known amount of cash with insignificant risk of change in value. As of December 31, 2017, investment funds were remunerated at a weighted average rate equivalent to 99.8% (91.3% as of December 31, 2016) of the CDI rate.
|
12/31/2017 |
12/31/2016 |
Private bonds |
731,061 |
77,080 |
Government bonds |
32,701 |
41,104 |
Investment funds |
191,827 |
313,049 |
Total |
955,589 |
431,233 |
As of December 31, 2017, private bonds were represented by time deposits and debentures, with first-tier financial institutions, remunerated at a weighted average rate equivalent to 98% of the CDI rate (38% as of December 31, 2016, mainly represented by time deposits and short-term investments with first-tier financial institutions).
Government bonds were primarily represented by LFT and LTN, remunerated at a weighted average rate of 107.7% (102.3% as of December 31, 2016) of the CDI rate.
Investment funds include private funds and bonds remunerated at a weighted average rate of 98.9% (101.0% as of December 31, 2016) of the CDI rate, the value may be subject to significant changes before redemption or maturity.
|
12/31/2017 |
12/31/2016 |
Deposits in guarantee of letter of credit |
60,423 |
15,721 |
Escrow deposits (a) |
71,110 |
67,345 |
Escrow deposits - Leases (b) |
116,131 |
78,015 |
Other deposits (c) |
20,383 |
7,688 |
Total |
268,047 |
168,769 |
(a) Includes R$32,120 related to a contractual guarantee for the Supreme Court of Justice - STJ related to PIS and COFINS on interest attributable to shareholders’ equity paid to GLAI as described in Note 21. The other amounts relate to guarantees of GLA letters of credit.
(b) Related to deposits made to obtain letters of credit for aircraft operating leases from GLA.
(c) Related mainly to bank guarantees.
F - 24
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
|
12/31/2017 |
12/31/2016 |
Local currency |
|
|
Credit card administrators |
454,975 |
345,798 |
Travel agencies |
307,149 |
228,089 |
Cargo agencies |
39,225 |
41,926 |
Airline partner companies |
3,780 |
4,153 |
Other |
43,871 |
66,774 |
Total local currency |
849,000 |
686,740 |
|
|
|
Foreign currency |
|
|
Credit card administrators |
67,479 |
49,104 |
Travel agencies |
9,829 |
16,323 |
Cargo agencies |
823 |
2,215 |
Airline partner companies |
47,662 |
31,200 |
Other |
366 |
8,837 |
Total foreign currency |
126,159 |
107,679 |
|
|
|
Total |
975,159 |
794,419 |
|
|
|
Allowance for doubtful accounts |
(38,681) |
(34,182) |
|
|
|
Total trade receivables |
936,478 |
760,237 |
F - 25
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
The aging list of trade receivables, net of allowance for doubtful accounts, is as follows:
12/31/2017 |
12/31/2016 | |
Not yet due |
||
Until 30 days |
594,968 |
348,168 |
31 to 60 days |
133,438 |
151,186 |
61 to 90 days |
44,642 |
66,925 |
91 to 180 days |
71,116 |
86,652 |
181 to 360 days |
26,541 |
11,147 |
Above 360 days |
241 |
239 |
Total not yet due |
870,946 |
664,317 |
|
|
|
Overdue |
|
|
Until 30 days |
21,686 |
19,117 |
31 to 60 days |
8,338 |
5,623 |
61 to 90 days |
3,559 |
10,915 |
91 to 180 days |
15,620 |
22,648 |
181 to 360 days |
8,059 |
20,609 |
Above 360 days |
8,270 |
17,008 |
Total overdue |
65,532 |
95,920 |
|
|
|
Total |
936,478 |
760,237 |
The changes in allowance for doubtful accounts are as follows:
|
12/31/2017 |
12/31/2016 |
Balance at the beginning of the year |
(34,182) |
(50,389) |
Additions |
(24,913) |
(9,806) |
Unrecoverable amounts |
17,649 |
16,250 |
Recoveries |
2,765 |
9,763 |
Balance at the end of the year |
(38,681) |
(34,182) |
7. Inventories
|
12/31/2017 |
12/31/2016 |
Consumables |
28,006 |
27,281 |
Parts and maintenance materials |
162,409 |
160,884 |
Other |
585 |
6,867 |
Provision for obsolescence |
(12,509) |
(12,444) |
Total |
178,491 |
182,588 |
The changes in provision for obsolescence are as follows:
|
12/31/2017 |
12/31/2016 |
Balances at the beginning of the year |
(12,444) |
(12,444) |
Additions |
(3,059) |
- |
Write-off |
2,994 |
- |
Balances at the end of the year |
(12,509) |
(12,444) |
F - 26
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
|
12/31/2017 |
12/31/2016 |
Prepaid and recoverable income taxes |
66,786 |
51,215 |
Withholding income tax (IRRF) (a) |
7,308 |
9,601 |
PIS and COFINS (b) |
408 |
16,908 |
Withholding tax of public institutions |
6,127 |
8,130 |
Value added tax – IVA (c) |
5,431 |
12,044 |
Other |
4,195 |
1,449 |
Total |
90,255 |
99,347 |
|
|
|
Current assets |
83,210 |
27,287 |
Noncurrent assets |
7,045 |
72,060 |
(a) IRRF: withholding income tax levied on financial income from financial investments.
(b) Contributions to Social Integration Program (PIS) and Contribution for the Financing of Social Security (COFINS).
(c) IVA: Value added tax on sales of goods and services abroad.
|
12/31/2017 |
12/31/2016 |
Net operating losses carryforward |
|
|
Income tax losses |
129,316 |
9,149 |
Negative basis of social contribution |
46,555 |
3,294 |
|
|
|
Temporary differences: |
|
|
Mileage program |
- |
9 |
Allowance for doubtful accounts and other credits |
63,585 |
13,823 |
Provision for losses on GLA’s acquisition |
143,350 |
143,350 |
Provision for legal proceedings and tax liabilities |
83,263 |
17,487 |
Aircraft return |
68,438 |
32,515 |
Derivative transactions |
9,603 |
1,635 |
Tax benefit due to goodwill incorporation (*) |
14,588 |
29,177 |
Flight rights |
(353,226) |
(353,226) |
Depreciation of engines and parts for aircraft maintenance |
(167,913) |
(148,581) |
Reversal of goodwill amortization on GLA’s acquisition |
(127,659) |
(127,659) |
Aircraft leases |
34,660 |
30,589 |
Other |
143,949 |
117,577 |
Total deferred taxes, net |
88,509 |
(230,861) |
|
|
|
Deferred tax assets – noncurrent |
276,514 |
107,159 |
Deferred tax liabilities – noncurrent |
(188,005) |
(338,020) |
(*) Related to the tax benefit from the reverse merger of G.A. Smiles Participações S.A. by Smiles S.A. Under the terms of the current tax legislation, the goodwill amortization for tax purposes will be a deductible expense on the taxable income calculation.
The Company, GLA and Smiles have net operating losses carryforward, comprised of accumulated income tax losses and negative basis of social contribution. The net operating losses carryforward do not expire; however, their compensation is limited to 30% of the annual taxable income. Net operating losses carryforward are as follows:
|
GLAI |
GLA |
Smiles | |||
|
12/31/2017 |
12/31/2016 |
12/31/2017 |
12/31/2016 |
12/31/2017 |
12/31/2016 |
Income tax losses |
172,547 |
190,125 |
4,134,099 |
3,971,845 |
758,289 |
867,403 |
Negative basis of social contribution |
172,547 |
190,125 |
4,134,099 |
3,971,845 |
758,289 |
867,403 |
As of December 31, 2017, the tax credits from tax losses carryforward were recorded based on the reasonably expected generation of future taxable income of GLAI and its subsidiaries, subject to legal limitations. The determination of the expected future taxable income were prepared based on the
F - 27
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
business plan approved by the Board of Directors on January 11, 2018.
The Company’s Management considers that the deferred assets recognized as of December 31, 2017 arising from temporary differences will be realized in connection with the realization of the deferred tax liabilities and the expectation of future results.
The analysis of the realization of deferred tax assets was prepared on a company basis, as follows:
GLAI: the Company has tax credits of R$62,548, of which R$58,666 is related to net operating losses carryforward and R$3,882 is related to temporary differences, with realization supported by the Company’s long-term plan. However, for the year ended December 31, 2017, the Company reassessed its projections and did not recognize deferred tax assets for the amount of R$34,845 related to net operating losses carryforward.
GLA: GLA has tax credits on net operating losses carryforward of R$1,405,594. In view of recent events on the political scenario in Brazil, instability of the economic environment, fluctuations in the U.S. dollar exchange rate and other variables that can affect the projections of future results, as well as the history of losses in recent years, GLA has not recorded the recognition of total tax credits on net operating losses carryforward. On March 10 and September 19, 2017, the Company entered into the Brazilian Tax Regularization Program (“PRT”) and the Special Tax Regularization Program (“PERT”), respectively, which allowed the partial settlement of tax contingencies with tax loss carryforwards, see Note 18. As a result, the Company used tax losses carryforward of R$225,005, which was recorded in the statement of operations for the year. Additionally, the Company analyzed the realization of deferred tax assets on temporary differences and limited the recognition based on the expected realization of deferred tax liabilities on temporary differences. As a result, the Company did not recognize the net amount of R$163,416 of deferred tax assets on temporary differences.
Smiles Fidelidade: As of July 1, 2017, Smiles S.A. was incorporated by Smiles Fidelidade S.A. and, based on the projections of future taxable income, recognized a deferred tax asset on tax losses carryforward of R$193,020. The amount was recorded based on the expected generation of future taxable income of Smiles Fidelidade.
The reconciliation of the income taxes in profit or loss for the years ended December 31, 2017, 2016 and 2015 is as follows:
F - 28
Gol Linhas Aéreas Inteligentes S.A. |
Notes to the consolidated financial statements |
For the years ended December 31, 2017, 2016 and 2015 |
(In thousands of Brazilian Reais - R$, except when otherwise indicated) |
|
12/31/2017 |
12/31/2016 |
12/31/2015 |
Income (loss) before income taxes |
70,996 |
1,361,422 |