Explanatory notes
15. Contingent Liabilities
The statement below shows the composition of contingent liabilities by program. Contingent Liabilities are used to register events subject to decisions that may or may not result in disbursements.
a) Pension Plan Program
Based on a technical opinion from the legal department and observing the risk classification indicated, PREVI constituted a provision to face law suits applied by former participants. In 2007, its amount reached R$357,645 thousand (R$240,630 thousand in 2006).
The variation observed in the provisions relative to law suits in the amount of R$117,015 thousand, resulted from the increase in the number of suits during 2007 and of the risk reclassification of suits in course.
b) Investment Program
In the segment of Real Estate the following provisions are registered:
(i) R$24,140 thousand for "potential liabilities" in labor, tax and civil obligations relative to Fundação Umberto I (R$27,453 thousand in 2006) and (ii) R$23,325 thousand (R$21,900 thousand in 2006) for fiscal contingencies in connection with Paes Mendonça (R$19,025 thousand) and Edifício São Luiz Gonzaga (R$4,300 thousand) ventures. Also registered in contingencies remains the amount of R$271,569 thousand set apart to meet the discounts in the debit balances of real estate financing contracts after transferring to Nova Carim.
c) Fiscal Contingencies
Based on legal opinions that consider the possibility of losing the appeal applied and supported by domestic and international accounting practices, was again waived the constitution of a reserve against the imposition by Secretaria da Receita Federal do Brasil (Brazil's Federal Income Tax Department) of Contribuição Social sobre o Lucro Líquido - CSLL (Social Contribution on Net Profits), of 1997, amounting in R$2,540,215 thousand (amount of the claim in 2004). See item 5-e in these Notes.