c) Interest on own capital
In meetings held in 2010, the Board of Directors approved the distribution of interest on own capital as follows:
Brazilian companies are permitted to pay interest on own capital to shareholders based on shareholders' equity, and treat such payments as a tax deductible expense for Brazilian income and social contribution tax purposes. Pursuant to the tax legislation, the interest on own capital of R$200,983 was recorded as financial expense. This notional interest distribution is treated for accounting purposes as a deduction from shareholders' equity in a manner similar to a dividend. A withholding tax is due and paid upon payments of interest on own capital to shareholders. Interest on own capital is treated as a dividend for purposes of the mandatory dividend payable if so approved by the shareholders.
The Company reclassified the amount of US$27.2 to shareholders' equity in respect of interest on own capital in excess of the minimum mandatory dividends of 25% not yet approved by the Shareholders' General Meeting.
d) Proposed dividends
The determination of the annual dividends, subject to the approval of the shareholders at the Annual General Meeting, is presented in Reais as Brazilian Corporate Law establishes that all dividends are determined and paid based on Reais amounts in the legal books, is shown below:
|In millions of Brazilian reais||12.31.2010||12.31.2009|
|Net income for parent company in IFRS||573.6||912.1|
|Net income for parent company under BR GAAP (Previous GAAP)||573.6||890.4|
|Minimum mandatory dividend (25%)||132.4||208.1|
|Interest on own capital, net of tax||176.9||152.9|
|Proposed dividends – complement||-||55.2|
|Interest on own capital – excedent minimum mandatory dividend (i)||(45.2)||-|
|Total shareholder remuneration||131.7||208.1|
|Payments of the year||(49.6)||-|
|Total shareholder remuneration of open period||82.1||208.1|
|Total shareholders remuneration of previos period||0.2||0.2|
|Total shareholders remuneration – In millions of Brazilian reais||82.3||208.3|
|Total shareholders remuneration – In millions of US$||49.4||119.6|
(i) The excess amount is reclassified from current liabilities to the account additional dividends proposed in the revenue reserve in shareholder's equity.
e) Statutory reserve
The statutory reserve is recorded annually as an appropriation of 5% of the net income for the year. The reserve may not exceed 20% of capital, or 30% of capital and capital reserves.
f) Investment subsidy reserve
This reserve is determined in accordance with the terms of article 195-A of Brazilian Corporate Law (as amended by Law No. 11,638, of 2007), and corresponds to the appropriation of part of the retained earnings derived from government subsidies received for investments in research and development by the Company.
These subsidies are not included in the calculation of the minimum mandatory dividends.
g) Investment and working capital reserve
The purpose of this reserve is to: (i) shield funds for investments in property, plant and equipment, without detriment to retained earnings, pursuant to art. 196 of Law 6.404/76; and (ii) shield funds for the Company's working capital. The reserve may also be used to redeem, reimburse or purchase shares of the Company and to be distributed to the shareholders.
h) Treasury shares
Treasury shares are comprised of 16,800,000 common shares mainly acquired on April 4, 2008, amounting to US$183.7, charged to the Investment and working capital reserve. This transaction was carried out in accordance with the guidelines approved by the Board of Directors in a meeting held on December 7, 2007. The shares purchased will be held in Treasury during which time their voting and economic rights will be suspended.
At December 31, 2010, the fair value of the treasury shares was US$119.0 (2009 – US$91.8 and January 1st, 2009 – US$63.3).
i) Other Comprehensive Income