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Notice to the Market - Compliance to International Accounting Standards

Notice to the Market

Compliance to International Accounting Standards

Consolidated Financial Statements under IFRS

Porto Alegre, April 05, 2012.

Banco do Estado do Rio Grande do Sul ("Banrisul", the "Bank" or the "Company") presents herein the consolidated financial statements for the years ended December 31, 2011 and 2010 under IFRS - International Financial Reporting Standards.

IFRS, a brief history

The International Accounting Standards (International Accounting Standards - IAS), known as IFRS (International Financial Reporting Standards) are a set of accounting pronouncements published and revised by the IASB (International Accounting Standards Board).

The primary purpose of these financial statements under IFRS is to provide information about the financial conditions, changes in such conditions and the results of the Company that are useful to investors, governments, financial institutions and stakeholders at the moment of decision making, with the realization that a principles-based standards would be more faithful to economic reality of transactions than standards based strictly on rules.

IFRS were adopted by the European Union countries from the end of 2005 with the aim of harmonizing the consolidated financial statements. As the outcome was better than expected, the measure has been widely accepted by the financial community. Nowadays, many countries have intensified activities towards converging to these accounting standards, Brazil among them, having started its process in 2010.

The Central Bank of Brazil (BCB) issued the Resolution no. 3786/09 of the National Monetary Council (CMN) which required the preparation of consolidated financial statements in accordance with international accounting standards (IFRS) as of December 31, 2010, as approved by the International Accounting Standards Board (IASB), translated into Portuguese by a Brazilian entity accredited by the International Accounting Standards Committee Foundation (IASC). As permitted by the BCB through Circular Letter no. 3435/10, Banrisul chose January 1st, 2010 (the transition date) as the date of transition between the practices adopted in Brazil (BR GAAP) and under the IFRS.

Conciliation between GAAP and IFRS
Adjustments:

(a) Financial Leasing Transactions

Banrisul has considered rental agreements as financial leases based on facts and circumstances at the date of transition to IFRS. A financial lease is a leasing transaction where all the risks and rights on the ownership of an asset are substantially transferred.

(b) Property, Plant and Equipment
Banrisul has revised the useful lives of property, plant and equipment according to IFRS. The revised useful lives correspond to changes in estimates which, therefore, are prospectively recorded, affecting only the net income for the year and not the opening balance.

(c) Impairment of Financial Assets
Under accounting practices adopted in Brazil for financial institutions, the recognition of allowances for credit risks follows the rules set out by the National Monetary Council through Resolution no. 2682/99, which is based on the ‘expected loss’ concept. Under IFRS, the measurement model for allowance for loan transactions is based on the ‘incurred loss’ model, which requires identifying objective evidence of impairment losses as a result of one or more events that have occurred after the initial recognition of the financial asset.

(d) Adjustment to Employee Benefits
Banrisul opted to apply IFRS 1 exemption to employee benefits. Accordingly, all accumulated past actuarial losses related to healthcare plans, totaling R$14,893 thousand, were recognized in retained earnings as at January 1st, 2010.

(e) Deferred Income Tax and Social Contribution
Deferred tax assets are recognized under the accounting practices adopted in Brazil
when, and only when, there is a study that proves that these are expected to be realized within ten years. For IFRS purposes, deferred tax assets whose realization is probable must be recognized, generating a total increase of R$23 thousand as of January 1st, 2010.
The other changes in taxes and social contributions represent the effects of the deferred tax adjustments for the transition to IFRS.

Reconciliation of Equity in January 1st 2010 and December 31, 2010 and 2011


Reconciliation of Profit for the Year ended in 12/31/10 and 12/31/11


Financial Statements Structure
Amounts in Thousands of Reais, unless otherwise indicated




Business Segment Note

The Retail segment encompasses a group of banking services, funding from the branch network and loan transactions for the individual and corporate customers, including micro businesses and small and medium-sized enterprises.

The Corporate segment is responsible for the management of products and services linked to funding, as well as to non earmarked credit and long-term, agricultural, mortgage and foreign exchange loan transactions for government-related individuals and large corporations.

The Treasury segment is responsible for Banrisul‘s cash flow management and the control and management of its own financial assets portfolio.

Risk Note - BR GAAP and IFRS main differences

Credit risk: qualitative and quantitative information.

Market risk: qualitative and quantitative information.

Liquidity Risk:

Click here to access the Consolidated Financial Statements under IFRS.

Porto Alegre, March 30, 2012.

João Emílio Gazzana
CFO & Investor Relations Officer


BANRISUL S.A.


Alexandre Pedro Ponzi
Head of Investor Relations
Telephone: +55 (51) 3215-3232
E-mail: ir@banrisul-ri.com.br
Website: www.banrisul.com.br/ir


Contact IR

Phone: +55 51 3215-3232
E-mail: ri@banrisul.com.br

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