Mail Stop 3561
July 26, 2005
Ms. Carla Cico
Chief Executive Officer
Brasil Telecom S.A.
SIA/Sul, ASP, Lote D, Bloco B-
71215-000 - Setor de Industria, Brasilia, DF, Brazil
Re: Brasil Telecom S.A.
Form 20-F for Fiscal Year Ended December 31, 2004
Filed June 15, 2005
File No. 1-15256
Dear Ms. Cico:
We have reviewed your filing and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and do not intend to expand our review to
other
portions of your documents. Please address the following comments
in
future filings. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a future revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 20-F for Fiscal Year Ended December 31, 2004
Item 5. Operating and Financial Review and Prospects, page 64
Liquidity and Capital Resources, page 88
Indebtedness, page 89
1. We note that your public non-convertible debentures, which were
issued on July 5, 2004, were guaranteed by your holding company,
Brasil Telecom Participacoes S.A. Tell us how you applied the
guidance in Rule 3-10 of Regulation S-X in determining whether
financial statements of the guarantor were required.
Item 15. Controls and Procedures, page 137
2. We note that your principal executive officer and principal
financial officer concluded that your disclosure controls and
procedures were "effective in recording, processing, summarizing
and
reporting, on a timely basis, information required to be discussed
by
us in the reports we file or submit under the Exchange Act."
Please
clarify that your disclosure controls and procedures also are
effective to ensure that information required to be disclosed in
the
reports that you file or submit under the Exchange Act is
accumulated
and communicated to your management, including your principal
executive and principal financial officers, to allow timely
decisions
regarding required disclosure. See Rule 13a-15(e) of the Exchange
Act. Alternatively, you may simply state that your disclosure
controls and procedures are effective. In addition, please revise
your disclosure in future filings.
3. We note your disclosure that "there have been no significant
changes in our internal control over financial reporting that
occurred during the year ended December 31, 2004 that have
materially
affected, or are reasonably likely to materially affect our
internal
control over financial reporting" (emphasis added). Item 308(c) of
Regulation S-K requires the disclosure of any change in your
internal
control over financial reporting identified in connection with an
evaluation thereof that occurred during your last fiscal quarter
(or
your fourth fiscal quarter in the case of an annual report) that
has
materially affected, or is reasonably likely to materially affect,
your internal control over financial reporting. Please confirm
for
us that there was no change in your internal control over
financial
reporting that occurred during your fourth fiscal quarter in 2004
that has materially affected, or is reasonably likely to
materially
affect, your internal control over financial reporting, and
provide
the disclosure required by Item 308(c) of Regulation S-K in future
filings.
Note 8. Net non-operating expenses, page F-19
4. Clarify for us the nature of the loss of R$51.6 million on your
investment in VANT Telecommunicacoes S.A. Tell us how you
originally
accounted for the amount deposited in a collateral account as a
guarantee for the option to the purchase agreement. In addition,
clarify how you accounted for the acquisition of the remaining
interest in 2004 for U.S. GAAP reporting purposes.
Note 18. Intangibles, page F-26
5. Refer to footnote (a). Explain for us in more detail your
accounting treatment for the goodwill associated with the merger
of
CRT. Specifically, tell us how you account for the usage of the
deferred tax assets associated with the goodwill amortization at
page
F-20, and the issuance of shares to the controlling shareholder
corresponding to the realized tax benefit, discussed at page F-46.
In addition, clarify the nature of the goodwill recorded as an
intangible asset relating to the merger of CRT and the
relationship
of this asset to the deferred tax asset recorded for this
transaction. You may wish to provide us with example journal
entries
to illustrate your accounting treatment for each of these
transactions. Also, tell us whether you have recorded any
reconciling items associated with these transactions for U.S. GAAP
reporting purposes and tell us your basis in the U.S. GAAP
literature
for your accounting treatment.
Note 33. Summary of the differences between Brazilian GAAP and
U.S.
GAAP, page F-63
b. Dividends and interest on shareholders` equity, page F-64
6. Tell us your basis for recording the distributions
characterized
as interest on shareholders` equity and the minimum compulsory
dividends prior to approval by the shareholders for U.S. GAAP
reporting purposes.
m. Valuation of long-lived assets, page F-68
7. We note your disclosure that no impairment losses were
recognized
under Brazilian GAAP and U.S. GAAP for all periods presented.
This
statement appears inconsistent with your disclosure at page F-19
regarding a charge of R$387 million in 2003 for the write-off of
permanent assets due to obsolescence or replacement. Clarify for
us
the nature of this charge and tell us how you applied the guidance
in
SFAS 144 for U.S. GAAP reporting purposes.
o. Goodwill & other intangible assets and business combination,
page
F-69
Goodwill & other intangible assets, page F-69
8. We note that you consider your entire fixed-line business to be
one reporting unit. Tell us how you have defined your reporting
units for any goodwill that exists in your other operating
segments.
In addition, tell us and disclose the information required by
paragraph 45.c. of SFAS 142 regarding the allocation of goodwill
by
segment.
Note 34. Additional disclosures required by U.S. GAAP, page F-83
a. Pension and other post-retirement benefits, page F-83
9. We note that the expected long-term rate of return on plan
assets
for 2004 is 12.5%, which is significantly higher than your
expected
rate in 2003. Tell us your basis for this assumption.
* * * *
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please furnish
a
letter that keys your responses to our comments and provides any
requested information. Detailed letters greatly facilitate our
review. Please file your response letter on EDGAR. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
You may contact Melissa Hauber, Staff Accountant, at (202)
551-
3368 or Carlos Pacho, Senior Assistant Chief Accountant, at (202)
551-3835 if you have questions regarding comments on the financial
statements and related matters. Please contact me at (202) 551-
3810
with any other questions.
Sincerely,
Larry Spirgel
Assistant Director
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Ms. Carla Cico
Brasil Telecom S.A.
July 26, 2005
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