| Financial assets and financial liabilities | 13 Financial
assets and financial liabilities
13.1 Financial
assets Schedule of financial assets
Financial
assets 2021 2020
At
amortized cost
Cash
and cash equivalents 748,562 1,045,042
Restricted
cash - 2,053
Trade
receivables 405,793 309,944
Total 1,154,355 1,357,039
Current 1,126,913 1,347,359
Non-current 27,442 9,680 Financial instruments
at amortized cost include trade receivables and cash and cash equivalents. Schedule of financial liabilities
13.2 Financial
liabilities
Financial
liabilities 2021 2020
At
amortized cost
Trade
payables 59,098 35,743
Loans
and financing 1,374,876 617,485
Lease
liabilities 714,085 447,703
Accounts
payable to selling shareholders 679,826 518,240
Notes
payable 72,726 76,181
Advances
from customers 114,585 63,839
Total 3,015,196 1,759,191
Current 581,685 467,643
Non-current 2,433,511 1,291,548
13.2.1 Loans
and financing Schedule of loans and financing
Financial
institution Currency Interest
rate Maturity 2021 2020
Banco
Itaú Unibanco S.A . (a) Brazilian
real CDI
+ 1.62% p.y. 2023 510,972 504,365
Banco
Votorantim Brazilian
real CDI
+ 1.65% p.y. 2021 - 101,785
BNDES
(c) Brazilian
real 10.03%
p.y. 2024 - 471
FINEP
(d) Brazilian
real TJLP
p.y. 2027 10,145 10,864
Softbank
(f) Brazilian
real 6.5%
p.y. 2026 822,560 -
Banco
Itaú Unibanco S.A . (e) Brazilian
real CDI
+ 1.75% p.y. 2024 31,199 -
1,374,876 617,485
Current 128,720 107,162
Non-current 1,246,156 510,323
(a) On October 1, 2020, Afya Brazil
entered into a loan with Banco Itaú Unibanco S.A. in the amount of R$ 500,000 1.62
(b) On July 3, 2020, Afya Brazil entered
into a loan agreement with Banco Votorantim S.A. in the amount of R$ 100,000 1.65
(c) On May 5, 2020, as a result of the
acquisition of UniSL, the Company assumed loans agreements with BNDES which has an interest rate of 10.03
(d) On July 23, 2019, Medcel entered
into a loan of R$ 16,153 6,734 4,130
(e) On October 28, 2020, UNIFIPmoc entered
into a loan with Banco Itaú Unibanco S.A. in the amount of R$ 30,000 1.75
(f) On April 26, 2021, the Company issued
and sold 150,000 0.00005 150,000 821,805 Each Series A perpetual
convertible preferred share is entitled to a cash dividend of 6.5% per annum and is convertible, at the holder’s discretion, into
the Company’s Class A common shares at an initial conversion price of US$25.35. The Company may require the conversion of any or
all of the Series A perpetual convertible preferred shares at any time on or after the three-year anniversary of the original issuance
date if certain conditions set forth in the certificate of designation are met (if for 20 out of 30 consecutive trading days prior, Afya’s
stock price is equal or above 150% of the conversion rate). The Company may also redeem any or all of the Series A perpetual convertible
preferred shares for cash, shares of its common shares or a combination thereof at its election, at any time on or after the seven-year
anniversary of the original issuance date as determined in the certificate of designation. On or after the five-year anniversary of the
original issuance date, the holders of the Series A convertible perpetual preferred shares shall have the right to redeem all of the
outstanding Series A convertible perpetual preferred shares for cash, the Company’s common shares or a combination thereof (at
the Company’s election, subject to certain conditions) to be determined in the certificate of designation. Upon the occurrence
of a change of control, the holders will have the right to redeem their Series A convertible perpetual preferred shares for cash at a
price set forth in the certificate of designation. The Series A convertible
perpetual preferred shares will be entitled with the same voting rights of the common shares only when converted into it. The Company determined
that the Series A perpetual convertible preferred shares should be classified as financial liability at amortized cost upon their issuance
since is redeemable primarily according to the decision of the holder and there is a contractual obligation to deliver assets (cash,
shares of its common shares or a combination thereof) that could not be avoided by the Company in an event of redemption. The financial
liability is denominated in Brazilian Reais and thus not subject to foreign exchange changes. In addition, as
the entire instrument is classified as a liability, the embedded put option to redeem the Series A perpetual convertible preferred shares
for cash is an embedded derivative. The embedded derivative will not be treated separately once the exercise price of the option is closely
related to the host contract. The initial transaction
costs that are directly attributable to the issuance of Series A perpetual convertible preferred shares were measured at fair value together
with the financial liability on initial measurement. The transaction costs totaled R$ 13,030
13.2.2 Leases The Company has
lease contracts for properties. The lease contracts generally have maturities in the lease terms between 5 30 Schedule of right-of-use assets and lease liabilities Set out below are
the carrying amounts of right-of-use assets and lease liabilities and the movements during the period
Right-of-use
assets Lease
liabilities
As
of January 1, 2020 274,275 284,515
Additions 64,743 64,743
Remeasurement 34,161 34,161
Business
combinations 76,855 76,855
Depreciation
expense (29,386) -
Interest
expense - 44,458
Payments
of lease liabilities - (55,455)
Disposals (1,574) (1,574)
As
of December 31, 2020 419,074 447,703
Additions 62,689 62,689
Remeasurement 95,962 95,962
Business
combinations 139,514 139,514
Depreciation
expense (43,237) -
Interest
expense - 67,212
Payments
of lease liabilities - (87,751)
Disposals (10,316) (11,244)
As
of December 31, 2021 663,686 714,085
As
of December 31, 2020
Current - 61,976
Non-current 419,074 385,727
As
of December 31, 2021
Current - 24,955
Non-current 663,686 689,130 The Company reassessed
its current versus non-current segregation methods for the year ended December 31, 2021. The current lease liabilities balances are presented
as the amount expected to be amortized from the principal in the next twelve months. The Company recognized
lease expense from short-term leases and low-value assets of R$ 11,229 2,555 4,494
13.2.3 Accounts
payable to selling shareholders Schedule of accounts payable to selling shareholders
2021 2020
Acquisition
of IESP (a) - 38,771
Acquisition
of FASA (b) 41,581 70,356
Acquisition
of IPEMED (c) 30,233 38,622
Acquisition
of IPEC (d) - 28,307
Acquisition
of UniRedentor (e) 85,506 97,773
Acquisition
of UniSãoLucas (f) 42,672 53,386
Acquisition
of FCMPB (g) 149,175 189,420
Acquisition
of FESAR (h) - 1,569
Acquisition
of MEDPHONE (i) - 36
Acquisition
of Medicinae (j) 3,887 -
Acquisition
of Medical Harbour (k) 6,801 -
Acquisition
of Cliquefarma (l) 3,050 -
Acquisition
of Shosp (m) 2,141 -
Acquisition
of Unigranrio (n) 249,979 -
Acquisition
of RXPRO (o) 10,245 -
Acquisition
of Guaranhuns (p) 54,556 -
679,826 518,240
Current 239,849 188,420
Non-current 439,977 329,820
2021 2020 2019
Opening
balance 518,240 300,237 177,730
Cash
flows (192,681) (134,518) (92,688)
Acquisition
of IPEC and Guaranhus 54,000 - 54,000
Interest 31,915 13,884 17,977
Installments
on Business combinations 243,816 343,140 144,538
Contingent
consideration on Business combinations 24,536 - -
Compensation
of legal proceedings disbursement - (4,503) (1,320)
Closing
balance 679,826 518,240 300,237
(a) On November 27, 2018, Afya Brazil
acquired 80 106,200 35,400
(b) On April 3, 2019, Afya Brazil acquired
90 39,695 29,770 29,770
(c) On May 9, 2019, Afya Brazil acquired
100 45,303 9,061
(d) On August 13, 2019, Afya Brazil
acquired 100 54,000
(e) On January 31, 2020, Afya Brazil
acquired 100 100,000 4,503
(f) On May 5, 2020, Afya Brazil acquired
100 60,456 7,816
(g) On November 9, 2020, Afya Brazil
acquired 100 188,894
(h) On November 3, 2020, Afya Brazil
acquired 100 1,569
(i) On November 4, 2020, Afya Brazil
acquired 100 36
(j) On March 25, 2021, Afya Brazil acquired
100 4,400 3,887
(k) On April 8, 2021, Afya Brazil acquired
100 9,000 6,801
(l) On April 16, 2021, Afya Brazil acquired
100 3,000 3,050
(m) On May 13, 2021, Afya Brazil acquired
100 454 1,793 2,141
(n) On August 4, 2021, Afya Brazil acquired
100 618,956
(o) On October 01, 2021, Afya Brazil
acquired 100 21,000 10,245
(p) On November 05, 2021, Afya Brazil
concluded the acquisition of 100 54,000 54,000
13.2.4 Notes
payable With
the acquisition of UniSL, Afya Brazil assumed notes payable regarding the previous acquisition of a portion of the operations of Universidade
Luterana do Brasil (ULBRA) by UniSL in auction by the end of 2018. Two of the UniSL campuses, located in the cities of Ji-Paraná
and Porto Velho in the State of Rondônia, were acquired in such transaction. As of December 31, 2021, the notes payable of R$ 72,726 Set out below are
the carrying amount of notes payable and the movements during the years ended December 31, 2021 and 2020
Notes
payable
As
of January 1, 2020 -
Business
combinations 80,526
Payments (5,974)
Monetary
indexation 1,629
As
of December 31, 2020 76,181
As
of January 1, 2021 76,181
Payments (11,068)
Monetary
indexation 7,613
As
of December 31, 2021 72,726
As
of December 31, 2020
Current
liabilities 10,503
Non-current
liabilities 65,678
As
of December 31, 2021
Current
liabilities 14,478
Non-current
liabilities 58,248
13.3 Fair
values The table below
is a comparison of the carrying amounts and fair values of the Company’s financial instruments, other than those carrying amounts
that are reasonable approximation of fair values:
2021 2020
Carrying
amount Fair
value Carrying
amount Fair
value
Financial
assets
Restricted
cash - - 2,053 2,053
Trade
receivables (non-current) 27,442 27,442 7,627 7,627
Total 27,442 27,442 9,680
9,680
Financial
liabilities
Loans
and financing 1,374,876 1,387,136 617,485 637,723
Lease
liabilities 714,085 714,085 447,703 447,703
Accounts
payable to selling shareholders 679,826 679,826 518,240 518,240
Notes
payable 72,726 72,726 76,181 76,181
Total 2,841,513 2,853,773 1,659,609 1,679,847 The
Company assessed that the fair values of cash and cash equivalents, current trade receivables and other current assets, trade payables,
advances from customers and other current liabilities approximate their carrying amounts largely due to the short-term maturities of
these instruments. The
fair value of interest-bearing borrowings and loans are determined by using the DCF method using discount rate that reflects the issuer’s
borrowing rate as of the end of the reporting period. The own non-performance risk at December 31, 2021 was assessed to be insignificant.
13.4 Financial
instruments risk management objectives and policies The
Company’s principal financial liabilities comprise loans and financing, lease liabilities, accounts payable to selling shareholders,
notes payable, trade payables and advances from customers. The main purpose of these financial liabilities is to finance the Company’s
operations. The Company’s principal financial assets include trade receivables and cash and cash equivalents. The Company is
exposed to market risk, credit risk and liquidity risk. The Company monitors market, credit and liquidity risks in line with the objectives
in capital management and counts with the support, monitoring and oversight of the Board of Directors in decisions related to capital
management and its alignment with the objectives and risks. The Company’s policy is that no trading of derivatives for speculative
purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized
below.
13.4.1 Financial
instruments risk management objectives and policies Market
risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
The Company’s exposure to market risk is related to interest rate risk and foreign currency risk. The sensitivity
analysis in the following sections relate to the position as of December 31, 2021. (i)
Interest rate risk Interest
rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s
cash equivalents, loans and financing, accounts payable to selling shareholders and notes payable, with floating interest rates. Sensitivity
analysis The
following table demonstrates the sensitivity to a reasonably possible change in interest rates on cash equivalents, loans and financing
and accounts payable to selling shareholders and notes payable. With all variables held constant, the Company’s income before income
taxes is affected through the impact on floating interest rates, as follows: Schedule of sensitivity analysis effects on income statement
Increase
/ decrease in basis points
Balance
as of December, 31, 2021 Index
– % per year Base
rate +75 -75 +150 -150
Cash
equivalents 636,847 100.38%
CDI 58,440 4,776 (4,776) 9,553 (9,553)
Loans
and financing (510,972) CDI
+ 1,62% (55,032) (3,832) 3,832 (7,665) 7,665
Loans
and financing (31,199) CDI
+ 1,75% (3,401) (234) 234 (468) 468
Loans
and financing (10,145) TJLP (617) (76) 76 (152) 152
Accounts
payable to selling shareholders (612,121) CDI (56,009) (4,591) 4,591 (9,182) 9,182
Accounts
payable to selling shareholders (41,581) IPCA
+ 4,1% (1,708) (312) 312 (624) 624
Notes
payable (72,726) IPCA (531) (545) 545 (1,091) 1,091 (ii)
Foreign currency risk Foreign
currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange
rates. The Company’s exposure to the risk of changes in foreign exchange rates relates to cash and cash equivalents denominated
in U.S. dollars in the amount of R$ 23,228 70,523 Foreign
currency sensitivity Schedule of currencies used in sensitivity analysis The
following table demonstrates the sensitivity in the Company’s income before income taxes of a 10 5.5799 1.00
Exposure +10% -10%
As
of December 31, 2021
Cash
equivalents 23,228 2,323 (2,323)
13.4.2 Credit
risk Credit
risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial
loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities,
including cash and cash equivalents. Customer
credit risk is managed by the Company based on the established policy, procedures and control relating to customer credit risk management.
Outstanding customer receivables are regularly monitored. See Note 7 for additional information on the Company’s trade receivables. Credit
risk from balances with banks and financial institutions is management by the Company’s treasury department in accordance with
the Company’s policy. Investments of surplus funds are made only with approved counterparties and within limits assigned to
each counterparty. The
Company’s maximum exposure to credit risk for the components of the statements of financial position at December 31, 2021 and 2020
is the carrying amounts of its financial assets.
13.4.3 Liquidity
risk The Company’s
Management has responsibility for monitor liquidity risk. In order to achieve the Company’s objective, Management regularly reviews
the risk and maintains appropriate reserves, including bank credit facilities with first tier financial institutions. Management also
continuously monitors projected and actual cash flows and the combination of the maturity profiles of the financial assets and liabilities. The main requirements
for financial resources used by the Company arise from the need to make payments for suppliers, operating expenses, labor and social
obligations, loans and financing and accounts payable to selling shareholders. The
tables below summarize the maturity profile of the Company’s financial liabilities based on contractual undiscounted amounts:
As
of December 31, 2021 Less
than 1 year 1
to 3 years 3
to 5 years More
than 5 years Total
Trade
payables 59,098 - - - 59,098
Loans
and financing 217,903 585,686 948,503 1,212 1,753,304
Lease
liabilities 103,003 211,894 204,744 1,108,555 1,628,196
Accounts
payable to selling shareholders 246,059 445,066 88,989 - 780,114
Notes
payable 15,644 74,306 - - 89,950
Advances
from customers 114,585 - - - 114,585
756,292 1,316,952 1,242,236 1,109,767 4,425,247
As
of December 31, 2020 Less
than 1 year 1
to 3 years 3
to 5 years More
than 5 years Total
Trade
payables 35,743 - - - 35,743
Loans
and financing 125,137 566,157 4,010 3,094 698,398
Lease
liabilities 63,092 131,225 124,114 705,115 1,023,546
Accounts
payable to selling shareholders 191,145 262,340 81,153 - 534,638
Notes
payable 11,083 83,803 - - 94,886
Advances
from customers 63,839 - - - 63,839
490,039 1,043,525 209,277 708,209 2,451,050 Schedule of changes in liabilities arising from financing activities
13.5 Changes
in liabilities arising from financing activities
January
1, 2021 Payments Additions
* Interest Foreign
exchange movement Business
combinations Other December
31, 2021
Loans and financing 617,485 (158,076) 809,539 68,909 - 36,591 428 1,374,876
Lease liabilities 447,703 (87,751) 158,651 67,212 - 139,514 (11,244) 714,085
Dividends payable - (18,648) 18,648 - - - - -
Total 1,065,188 (264,475) 986,838 136,121 - 176,105 (10,816) 2,088,961
January
1, 2020 Payments Additions Interest Foreign
exchange movement Business
combinations Other December
31, 2020
Loans and financing 60,357 (155,090) 605,041 10,031 21,279 75,815 52 617,485
Lease liabilities 284,515 (55,455) 98,904 44,458 - 76,855 (1,574) 447,703
Dividends payable - (12,984) 12,984 - - - - -
Total 344,872 (223,529) 716,929 54,489 21,279 152,670 (1,522) 1,065,188
January
1, 2019 Payments Additions Interest Foreign
exchange movement Business
combinations Other December
31, 2019
Loans and financing 77,829 (75,093) 7,383 6,025 1,126 43,087 - 60,357
Lease liabilities 212,360 (39,779) 19,100 31,469 - 61,365 - 284,515
Dividends payable 4,107 (51,812) 51,812 - - - (4,107) -
Total 294,296 (166,684) 78,295 37,494 1,126 104,452 (4,107) 344,872
* The additions of loans and financing
include proceeds from the SoftBank transaction of R$ 822,569 13,030 |
